Utilization of constrained resources calculation of amount

Assignment Help Financial Accounting

Reference no: EM13356275

Utilization of constrained resources. Calculation of amount of contribution.

Banner company produce three products A,B and C . The selling price, variable costs and contribution margin for one unit of each product follow.

	Product
	A	B	C
Selling price.....	$60	$90	$80
Variable costs:
Direct materials	27	14	40
Direct labor	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 labor rate is $8 per hour, and only 3,000 hours of labor time are available each week.

Required:
1. Compute the amount of Contribution margin that will be obtained per hour of labor time spent on each product.
2. Which orders would you recommend that the company work on next week-the order for Product A, Product B, or Product C? Show computations.
3. By paying overtime wages more than 3,000 hours of direct labor 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? Explain.

Reference no: EM13356275

Questions Cloud

Impact of change in credit policy on the debt ratiocollins : impact of change in credit policy on the debt ratio.collins company had the following partial balance sheet and

Calculation of debt ratiokansas office supply had 24000000 : calculation of debt ratio.kansas office supply had 24000000 in sales last year. the companys net income was 400000. its

Calculation of times-interest-earned ratioalumbat : calculation of times-interest-earned ratio.alumbat corporation has 800000 of debt outstanding and it pays an interest

Utilization of constrained resources calculation of amount : utilization of constrained resources. calculation of amount of contribution.banner company produce nbspthree products

Evaluating a special order and its impact on the companys : evaluating a special order and its impact on the companys income.miyamoto jewelers is considering a special order for

Whether a component should be made or : whether a component should be made or purchased?climate-control inc. manufactures a variety of heating and

Should a particular segment be dropped or continued provide : should a particular segment be dropped or continued. provide reasons.jackson county senior services is a nonprofit

To classify costs associated with manufacturing firms : to classify costs associated with manufacturing firms merchandising firms or service firms as 1product or period costs

User Account

All Pages