Question
Kirkland manufactures two products (A & B). Both products include emitrol and ullocide as part of the materials for productions. The costs below are computed
Kirkland manufactures two products (A & B). Both products include emitrol and ullocide as part of the materials for productions. The costs below are computed at a monthly capacity level of 10,000 units of each product. Kirkland has more demand for each of the two products than it can meet. It as been operating at capacity for the last year.
Product A | Product B | |
Sales price per unit | 340 | 730 |
Variable cost per unit | 100 | 280 |
Common fixed costs per unit | 42 | 76 |
Ounces of emitrol needed per unit | 1 | 25 |
Ounces of ullocide needed per unit | 4 | 10 |
1. What is the contribution margin per unit for Product A?
2. What is the contribution margin per unit for Product B?
3. Kirkland has learned that there is a shortage of emitrol. Next month, only 8100 ounces of emitrol will be available for use. Which product should Kirkland produce, given these facts? Type just A or B
4. Assume the limitation stated in question 3. What is the projected total contribution margin for Kirkland next month if they choose to only produce Product A?
5. Assume the limitation stated in question 3. What is the projected total contribution margin for Kirkland next month if they choose to only produce Product B?
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