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Guitar Mania Ltd, makes two types of wood guitars in a single facility. Data concerning these guitars is included in the following tables: Selling price
Guitar Mania Ltd, makes two types of wood guitars in a single facility. Data concerning these guitars is included in the following tables: Selling price per unit Total variable costs per unit Contribution margin CM Ratio Kilograms of wood per unit Demand in units Products AB $ 800 $ 700 $ 480 $ 410 $ 320 $ 290 40% 30% 5 3 500 1,000 Demand for the company's guitars is very strong, with far more orders on hand each month than the company has raw materials available. The same material (wood) is used in both types of guitars and costs $30.00 per kilogram with a maximum of 5,000 kilograms available each month. Required: Required: a) How may kilograms of material would be required to satisfy demand? (2 marks) b) Which orders would you advise the company to accept first? Show work to support your decision. (2 marks) c) How much would the company be willing to pay for one additional kilogram of material in excess of the normal price if the company has already made the best use of the existing 5,000 kilograms. (2 marks)
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