Exercise $11-12($Static$)$ Volume Trade$-$Off Decisions $[$LO$11-5]$

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 $24159$

Other variable expenses $242740$

Total variable expenses $484249$

Contribution margin $ $32$ $ $14$ $ $21$

Contribution margin ratio $40\%25\%30\%$

The company estimates that it can sell $800$ units of each product per month. The same raw material is used in each product. The material costs $$3$ per pound with a maximum of $5,000$ pounds available each month.

Required:

$1.$ Calculate the contribution margin per pound of the constraining resource for each product.

$2.$ Which orders would you advise the company to accept first, those for A$,$ B$,$ or C$?$ Which orders second? Third?

$3.$ What is the maximum contribution margin that the company can earn per month if it makes optimal use of its $5,000$ pounds of materials?