PQR company manufactures three finished goods: X, Y, and Z. The selling price, variable costs, and...

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PQR company manufactures three finished goods: X, Y, and Z. The selling price, variable costs, and contribution margin for one unit of each product are given in the following table: Selling price Variable costs: Direct material Direct labour Other variable costs Total Variable costs Contribution Margin Contribution margin ratio X $360 $48 $40 $164 $252 $108 30% Finished Good Y $540 $144 $50 $130 $324 $216 40% Z $480 $64 $60 $236 $360 $120 25% The same raw materials are used in all three products. PQR company has only 5,000 kilograms of raw materials on hand and will not be able to obtain more of it for several weeks due to the recent outbreak of COVID 19 in its supplier's plant. The production manager has approached the management accountant for help in deciding which product(s) to concentrate on when filling its backlog orders. The raw materials cost $8 per kilogram. Required: a) Compute each product's contribution margin per Kilogram of raw material? (5 marks) b) Which of the orders for X, Y and Z would you recommend that PQR company work on next week? Justify your answer with your computations? (5 marks) c) A supplier from a foreign country is available to provide the additional raw materials at a premium price. If there is unfilled demand for all three products, what is the highest price per kilogram that PQR company should be willing to pay for additional raw materials? Explain your answer. (10 marks) PQR company manufactures three finished goods: X, Y, and Z. The selling price, variable costs, and contribution margin for one unit of each product are given in the following table: Selling price Variable costs: Direct material Direct labour Other variable costs Total Variable costs Contribution Margin Contribution margin ratio X $360 $48 $40 $164 $252 $108 30% Finished Good Y $540 $144 $50 $130 $324 $216 40% Z $480 $64 $60 $236 $360 $120 25% The same raw materials are used in all three products. PQR company has only 5,000 kilograms of raw materials on hand and will not be able to obtain more of it for several weeks due to the recent outbreak of COVID 19 in its supplier's plant. The production manager has approached the management accountant for help in deciding which product(s) to concentrate on when filling its backlog orders. The raw materials cost $8 per kilogram. Required: a) Compute each product's contribution margin per Kilogram of raw material? (5 marks) b) Which of the orders for X, Y and Z would you recommend that PQR company work on next week? Justify your answer with your computations? (5 marks) c) A supplier from a foreign country is available to provide the additional raw materials at a premium price. If there is unfilled demand for all three products, what is the highest price per kilogram that PQR company should be willing to pay for additional raw materials? Explain your answer. (10 marks)

Answer rating: 100% (QA)

A B As we are able to see from the computations higher than Product X has highest contribution per m... View the full answer