Question
Futura Company produces products A and B.Per unit data concerning the two products follow: Product A Product B Selling price 170 140 Less: Variable expenses:
Futura Company produces products A and B.Per unit data concerning the two products follow:
Product A
Product B
Selling price
170
140
Less: Variable expenses:
Direct materials
50
45
Other variable expenses
69
46
Total variable expenses
119
91
Contribution margin
51
49
CM ratio
30%
35%
Demand for the company's products is very strong, with far more orders each month than the company has raw material available to produce.The same material is used in each product.The material costs $5 per kilogram with a maximum of 6,000 kilograms available each month.
How would you advise the company to prioritize the orders for A and B?Show calculations to support your answer.
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