Reference no: EM132583395
The following are the selling price, variable costs, and contribution margin for one unit of each of Banner Company's three products: A, B, and C:
Product A B C
Selling price$60 $90 $80
Variable costs:
Direct materials 27 14 40
Direct labour 12 32 16
Variable manufacturing overhead 3 8 4
Total variable cost 42 54 60
Contribution margin$18 $36 $20
Contribution margin ratio 30% 40% 25%
Due to a strike in the plant of one of its competitors, demand for the company's products far exceeds its capacity to produce. Management is trying to determine which product(s) to concentrate on next week in filling its backlog of orders. The direct labour rate is $8 per hour, and only 3,000 hours of labour time are available each week.
Required:
Question 1. Compute the amount of contribution margin that will be obtained per hour of labour time spent on each product. (Round your intermediate calculations to 1 decimal place.)
Question 2. By paying overtime wages, more than 3,000 hours of direct labour time can be made available next week. Up to how much should the company be willing to pay per hour in overtime wages as long as there is unfilled demand for the three products? (Do not round intermediate calculations.)
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