Answer:
Explanation:
For A:
SP = 180
Variable expenses:
DM 24
Other Variable expenses 102
Total Variable expenses = 102+24 = 126
Contribution margin = SP - Variable expenses = 180-126 = 54
Contribution margin per pound = 54/#pounds = 54/3 = $18/pound
*pounds = DM/material costs = 24/8 = 3 pounds
For B:
SP = 270
Variable expenses:
DM 80
Other Variable expenses 90
Total Variable expenses = 80+90= 170
Contribution margin = SP - Variable expenses = 270-170= 100
Contribution margin per pound = 54/#pounds = 100/10 = $8/pound
*pounds = DM/material costs = 80/8 = 10pounds
For C:
SP = 240
Variable expenses:
DM 32
Other Variable expenses 148
Total Variable expenses = 148+32= 180
Contribution margin = SP - Variable expenses = 240-180= 60
Contribution margin per pound = 54/#pounds = 60/4= $15/pound
*pounds = DM/material costs = 32/8 = 4pounds
2)
Maximum contribution margin that can be earned is by selling product A
6000*$18 = $108000
3)
Product A = 500 units*3*18 = 27000
pounds left (6000-(500*3))=4500
Product C (500*4*15) = 30000
pounds left (4500-(500*4))=2500
Product B (250 units*10*10) = 25000
Maximum contribution margin:
Product A 27000
Product B 30000
Product C 25000
Total 82000
4)
Product A and Product B demand is completely utilised by
own stock
For Product C more pounds are needed. That is why maximum
price that can be paid is $10 for additional raw material, which is the contribution margin of product C.
