Q1) Benoit Company manufactures three products, A, B, and C. Data concerning three products follow (per unit):
| |
Product |
| |
A |
B |
C |
| Selling price |
$80 |
$56 |
$70 |
| Less variable expenses: |
|
|
|
| Direct materials |
24 |
15 |
9 |
| Other variable expenses |
24 |
27 |
40 |
| Total variable expenses |
48 |
42 |
49 |
| Contribution margin |
$32 |
$14 |
$21 |
| Contribution margin ratio |
40% |
25% |
30% |
Demand for company products is very strong, with far more orders each month than company has raw materials available to produce. Same material is utilized in each product. Material costs $3 per pound with maximum of 5,000 pounds available each month.
Question:
Which orders would you suggest company to accept first, those for A, for B, or for C? Which orders second? Third?