Compute contribution margin
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Shelby Company produces three products: product X, product Y, and product Z. Data concerning the three products follow (per unit):
Product X
Product Y
Product Z
Selling price
$
85
$
65
$
75
Less variable expenses:
Direct materials
25.50
19.50
5.25
Labor and overhead
25.50
29.25
47.25
Total variable expenses
51.00
48.75
52.50
Contribution margin
$
34.00
$
16.25
$
22.50
Contribution margin ratio
40
%
25
%
30
%
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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 $6 per pound, with a maximum of 4,400 pounds available each month.
Required :
(a)
Compute contribution margin per pound of materials used. (Round your answer to 2 decimal places. Omit the "$" sign in your response.)
Contribution margin
Product X
$
Product Y
$
Product Z
$
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(b)
Which orders would you advise the company to accept first, those for product X, for product Y, or for product Z? Which orders second? Third?
Product X
(Click for List) First Second Third
Product Y
(Click for List) First Second Third
Product Z
(Click for List) First Second Third
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Solution Summary
This provides the steps to calculate the compute contribution margin
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Exercise 13-11 Utilization of a Constrained Resource [LO5]
Shelby Company produces three products: product X, product Y, and product Z. Data concerning the three products follow (per unit):
Product X Product Y Product Z
Selling price $ 85 $ 65 $ 75
Less variable expenses:
Direct materials 25.50 19.50 5.25
Labor and overhead 25.50 29.25 47.25
Total variable expenses ...
Purchase this Solution
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