Answered: contribution margin?

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter20: Inventory Management: Economic Order Quantity, Jit, And The Theory Of Constraints

Section: Chapter Questions

Problem 3CE: Patz Company produces two types of machine parts: Part A and Part B, with unit contribution margins...

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Question

affa Limited produces three products—X, Y, & Z—with the following characteristics:

	X	Y	Z
Selling price per unit	$20	100%	$16	100%	$20	100%
Variable cost per unit	12	60%	12	75%	8	40%
Contribution margin per unit	$8	40%	$4	25%	$12	60%
Machine hours per unit	5		3		4

The company has only a limited number of machine-hours available each month. If demand exceeds the company's capacity, in what sequence should orders be filled if the company wants to maximize its total contribution margin?

Multiple Choice

Orders for Y first, X second, and Z third.
Orders for X first, Z second, and Y third.
Orders for Z first, X second, and Y third.
Orders for Z first, Y second and X third
Orders for Y only

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