If we preempt a resource from a process, the process cannot continue with its normal execution and it must be ____________a) abo
1 answer:
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Solution :
A () $ 24 $ 15 $9
B (Material cost per pound) $3 $3 $3
C=A/B (pound of material per unit) 8 5 3
D (Contribution margin per unit) $32 $14 $21
E=D/C (Contribution margin pound $ 4 $ 2.8 $ 7
of raw materials)
Order of preference to allocate material 2nd 3rd 1st
Since the product C has maximize 'contribution margin per pound' it will give 1st preference, followed by the product A and B.
The allocation of the available 5000 pounds of the raw material.
A B C
Maximize units that can be sold (A) 1000 1000 1000
Materials required per unit (B) 8 5 3
Total material requirement (C) 8000 5000 3000
Available raw material in pounds 5000 pounds
(-) first allocation to product C 3000 pounds
Remaining material 2000 pounds
(-) seconds allocation to product A 2000 pounds
Remaining for the product B 0 pounds
Now calculating the total contribution on the above allocation basis.
A B C Total
Material allocated to A(pounds) 2000 0 3000 5000
Contribution per pound (B) $ 4 $2.8 $7
Total contribution margin (AxB) $8000 $0 $21000 $29,000
Therefore, the total contribution margin is $29,000.