Managerial Accounting: E13-12 Benoit Company produces three products, A, B and C

Managerial Accounting

Exercise 13-12 Utilization of a Constrained Resource
Benoit Company produces three products, A, B and C. Data concerning the three products follow (per unit):
Product
A B C
Selling price $80 $56 $70
Variable Costs:
Direct materials 24 15 9
Other variable expenses 24 27 40
Total Variable Costs 48 42 49
Contribution Margin $32 $14 $21
Contribution Margin Ratio 40% 25% 30%

Demand for the company’s products is very strong, with far more orders each month than the company can produce with the available raw materials. The same material is used in each product. The material costs $3 per pound with a maximum of 5,000 pounds available each month.

Required:
Which orders would you advise the company to accept the first, those for A, for B, or for C? Which orders second? Third?
Powered by