Finding which orders would we advise the company to accept first,
Benoit Company produces three products, A, B, and C. Data concerning the 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 the company products is very strong, with far more orders each month than the company has raw materials available to produce. 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:
Which orders would you advise the company to accept first, those for A, for B, or for C? Which orders second? Third?