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Question - Cinderella Incorporated is currently producing three lines of dresses. The data on each dress is as follows:
BLUE
PINK
ORANGE
Selling price
$80
$56
$70
Variable expenses
Direct materials
24
15
9
Labour and overhead
27
40
48
42
49
Contribution margin
$32
$14
$21
Contribution margin ratio
40%
25%
30%
The same material is used in each dress. The material costs are $3 per yard, with a maximum of 5000 yards available each month. Demand for the dresses is very strong with demands for 300 Blue; 1000 Pink and 500 Orange.
Required -
1. Can we meet the current demand of all dresses?
2. In which order would you accept orders and at what amounts?
3. How much would you be willing to pay for extra yardage in order to complete demand 100%?
4. Give two other alternatives for the company to meet demand.
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