Benoit Company produces three products, A, B, and C. Data concerning the three products follow(per unit):ProductA B CSelling price ..................................................... $80 $56 $70Variable expenses:Direct materials ............................................ 24 15 9Other variable expenses .............................. 24 27 40Total variable expenses ................................... 48 42 49Contribution margin .......................................... $32 $14 $21Contribution margin ratio .................................. 40% 25% 30%Demand for the company’s products is very strong, with far more orders each month than the companycan produce with the available raw materials. The same material is used in each product. The materialcosts $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 orderssecond? Third?
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
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’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:
Which orders would you advise the company to accept first, those for A, for B, or for C? Which orders
second? Third?
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