Reference no: EM132949419

Benoit Company produces three products - A, B, and C. Data concerning the three products follow (per unit):

                                                                  Product

                                                                       A                    B                           C

Selling price                                       $80.00            $57.00             $70.00

Variable expenses:                                     -                    -                      -

Direct materials                                     24.00                15.00            12.00

Other variable expenses                           24.00               27.75           37.00

Total variable expenses                             48.00                 42.75         49.00

Contribution margin                                   $32.00               $14.25        $21.00

Contribution margin ratio                              40%                     25%            30%

The company estimates that it can sell 750 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 6,200 pounds available each month.

Required:

Problem 1. Calculate the contribution margin per pound of the constraining resource for each product.

Problem 2. Which orders would you advise the company to accept first, those for A, B, or C? Which orders second? Third?

Problem 3. What is the maximum contribution margin that the company can earn per month if it makes optimal use of its 6,200 pounds of materials?