Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Exercise 11-12 Volume Trade-Off Decisions [LO11-5] Benoit Company produces three productsA, B, and C. Data concerning the three products follow (per unit): Product A B

Exercise 11-12 Volume Trade-Off Decisions [LO11-5]

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

Product

A B C
Selling price $

88.00

$ 72.00 $ 78.00
Variable expenses:
Direct materials 26.40 18.00 9.00
Other variable expenses 26.40 36.00 45.60
Total variable expenses 52.80 54.00 54.60
Contribution margin $ 35.20 $ 18.00 $ 23.40
Contribution margin ratio 40 % 25 % 30 %

The company estimates that it can sell 900 units of each product per month. The same raw material is used in each product. The material costs $3 per pound with a maximum of 6,000 pounds available each month.

Required:

1. Calculate the contribution margin per pound of the constraining resource for each product.

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

3. What is the maximum contribution margin that the company can earn per month if it makes optimal use of its 6,000 pounds of materials?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Accounting for Decision Making and Control

Authors: Jerold Zimmerman

8th edition

78025745, 978-0078025747

More Books

Students also viewed these Accounting questions

Question

A chipped cracked sheet of glass is useless to us.

Answered: 1 week ago

Question

Youll receive our usual cheerful prompt service.

Answered: 1 week ago