I only need help with Part 3.. Please show work! Benoit Company produces three p
ID: 2528411 • Letter: I
Question
I only need help with Part 3.. Please show work!
Benoit Company produces three products—A, B, and C. Data concerning the three products follow (per unit):
Product
The company estimates that it can sell 800 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 5,000 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?
Solved>>>>>>>>>First (C) Second (A) Third (B)
3. What is the maximum contribution margin that the company can earn per month if it makes optimal use of its 5,000 pounds of materials?
Product
A B C Selling price $ 80 $ 56 $ 70 Variable expenses: Direct materials 24 15 9 Other variable expenses 24 27 40 Total variable expenses 48 42 49 Contribution margin $ 32 $ 14 $ 21 Contribution margin ratio 40 % 25 % 30 %Explanation / Answer
3 The company would first manufacture Product C, then left over materials to produce A and and any left over materials would be used to produce Product C. Pounds of materials for product C = 800*(9/3)= 2400 Pounds of materials for product A = 800*(24/3)= 6400 Units of Product A = (5000-2400)/(24/3)= 325 None of Product B units will be produced as no materials is left Maximum contribution margin=(800*21)+(325*32)= $27200