Exercise 10-13 Utilization of a Constrained Resource [LO5, LO6]

Banner Company produces three products: A, B, and C. The selling price, variable costs, and contribution margin for one unit of each product follow:

	Product
	A				B				C
Selling price	$	120			$	110			$	110
Variable costs:
Direct materials		61.20				22.50				41.00
Direct labor		25.00				50.00				30.00
Variable manufacturing overhead		5.00				10.00				6.00
Total variable cost		91.20				82.50				77.00
Contribution margin	$	28.80			$	27.50			$	33.00
Contribution margin ratio		24	%			25	%			30	%

Due to a strike in the plant of one of its competitors, demand for the company