Use the following to answer questions 1-2: CHAVEZ Corporation (10 points)

CHAVEZ Corporation produces three products: Alpha, Beta and Delta. The following unit information is

available:

Alpha Beta Delta

Selling price $ 60 $ 90 $ 80

Variable costs:

Direct materials 27 14 40

Direct labor 12 32 16

Variable overhead 3 8 4

Total variable costs 42 54 60

Contribution margin $ 18 $ 36 $ 20

Contribution margin ratio 30% 40% 25%

Hour required per unit 1.5 4 2

The direct labor rate is averages $8 per hour. Based on current staffing, a maximum of 3,000 direct labor

hours are available each month.

A suspicious fire has burned down the factor of their biggest competitor. As a result, they are experiencing

large demand which is WAY bigger than their current capacity. They need to know which product to focus

on next month.

1. Which orders would you recommend that the company work on next month - orders for Alpha,

Beta or Delta? Show all computations.

_______________

Alpha, Beta or Delta

2. NOW ASSUME that the current market demand for Alpha is 1,000 units. In this case, how

many BETA should they manufacture?

_________ units