Benoit Company produces three products, A, B, and C. Data concerning the three products follow...


Benoit Company produces three products, A, B, and C. Data concerning the three products follow (per unit):

Product A B C
Selling price $90 $70 $80
Variable expenses:
Direct materials 27.00 21.00 5.60
Other variable expenses 27.00 31.50 50.40
Total variable expenses 54.00 52.50 56.00
Contribution margin $36.00 $17.50 $24.00
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 $4 per pound with a maximum of 5,400 pounds available each month.

a. Compute contribution margin per pound of materials used. (Round your intermediate calculations and final answers to 2 decimal places.)

b. Which orders would you advise the company to accept first, those for A, for B, or for C? Which orders second? Third?

Cost Volume Profit Analysis:

The finance head in a start-up enterprise among various other responsibilities has to advise the management on the selling price of each product category. The application of cost volume profit analysis provides the desired selling price without impacting the profitability.

Answer and Explanation: 1

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a) Given the following information for Product A, B, and C

  • The total direct material cost per unit for Product A, B, and C
  • The direct material cost...

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Computing the Sales Mix with Limited Resources


Chapter 8 / Lesson 6

Sales mix is the cumulative goods produced by a business, ideally organized to maximize efficient use of the finite resources available. Learn how this is calculated, and how the theory of constraints is considered in the process.

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