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EXERCISE 12 9 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

EXERCISE 12–9 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 . . . . . . . . . . . . . . . . .

$80

$56

$70

Variable expenses:

Direct materials . . . . . . . . . . . .

 

24

 

15

 

9

Labor and overhead . . . . . . . . .

24

27

40

Total variable expenses . . . . . . . .

48

42

49

Contribution margin . . . . . . . . . . .

$32

$14

$21

Contribution margin ratio . . . . . . .

40%

25%

30%

 

 

 

Demand for the company’s products is very strong, with far more orders each month than the com- pany can produce with the available raw materials. The same material is used in each product. The material costs $3 per pound, with a maximum of 5,000 pounds available each month.

 

Required:

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?

Jun 27 2020 View more View Less

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