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Exercise 12-12 Utilization of a Constrained Resource [LO12-5]

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

	Product
	A				B				C
Selling price	$	125			$	105			$	115
Variable expenses:
Direct materials		37.50				31.50				8.05
Other variable expenses		37.50				47.25				72.45
Total variable expenses		75.00				78.75				80.50
Contribution margin	$	50.00			$	26.25			$	34.50
Contribution margin ratio		40	%			25	%			30	%

Demand for the companys 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 $7 per pound with a maximum of 5,300 pounds available each month.

Required:

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?

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