| Product X |
|
Product Y |
|
Product Z |
| Selling price |
$ |
80 |
|
|
$ |
56 |
|
|
$ |
70 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Variable expenses: |
|
|
|
|
|
|
|
|
|
|
|
| Direct materials |
|
24 |
|
|
|
15 |
|
|
|
9 |
|
| Labor and overhead |
|
24 |
|
|
|
27 |
|
|
|
40 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total variable expenses |
|
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:
a. Compute contribution margin per pound of materials used.