Exercise 10-12 Utilization of a Constrained Resource [LO10-5]

Benoit Company produces three products, A, B, and C. Data concerning the three products follow (per unit):

Product

A B C Selling price $ 80 $ 56 $ 70 Variable expenses: Direct materials 24 15 9 Other variable expenses 24 27 40 Total variable expenses 48 42 49 Contribution margin $ 32 $ 14 $ 21 Contribution margin ratio 40 % 25 % 30 %

Demand for the companys products is very strong, with far more orders each month than the company can produce with the available raw materials. The same material is used in each product. The material costs $3 per pound with a maximum of 5,000 pounds available each month.

Required:

1.

Compute contribution margin per pound of materials used. (Round your answers to 2 decimal places.)

2.

Which orders would you advise the company to accept first, those for A, for B, or for C? Which orders second? Third?