Question

Benoit Company produces three products, A, B, and C. Data concerning the three products follow (per unit): Product A B C Selling price $ 65 $ 45 $ 55 Variable expenses: Direct materials 19.50 13.50 3.85 Other variable expenses 19.50 20.25 34.65 Total variable expenses 39.00 33.75 38.50 Contribution margin $ 26.00 $ 11.25 $ 16.50 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 4,500 pounds available each month. . Compute contribution margin per pound of materials used. (Round your intermediate calculations and final answers to 2 decimal places.)

Answer 1

Answer:

Product A Contribution per pound: $4.000

Product B Contribution per pound: $2.500

Product C Contribution per pound: $12.857

Explanation:

$\left[\begin{array}{cCcc}&A&B&C\\ Sales&65&45&55\\ Variable&39&33.75&38.5\\ CM&26&11.25&16.5\\ Constrain resource usage &6.5&4.5&1.2833\\ CM per constrain&4&2.5&12.857\\\end{array}\right]$

we need to calcualte the pounds used on each product:

A: $19.5 material cost/ $3 per pound =  6.5

B: $13.5 material cost/ $3 per pound =  4.5

C: $3.85 material cost/ $3 per pound = 1.2833

Then we divide the contribution of eahc product by the amount of pounds used to know the contribution based on direct materials pounds.