Question

Glover Company makes three products in a single facility with the following information:

	A	B	C
Selling Price per unit	$85.00	$97.00	$91.00
Direct Materials	16.00	11.00	14.00
Direct Labor	19.00	17.00	20.00
Variable Manufacturing	3.0	2.5	4.0
Fixed Manufacturing	22.00	24.00	30.00
Variable Selling Cost	3.00	2.50	1.90
Mixing Minutes / Unit	4.0	2.5	3.0
Monthly demand (units)	1,500	2,000	500

**The company only has 10,500 minutes available per month to mix these products**

Calculate the contribution margin per unit

How much of each of these products should be produced to maximized net operating income, and what would the total contribution margin equal?

Answer 1

		A	B	C
Sales	A	85.00	97.00	91.00
Variable costs
Direct materials		16.00	11.00	14.00
Direct Labor		19.00	17.00	20.00
Variable Manufacturing		3.00	2.50	4.00
Variable selling costs		3.00	2.50	1.90
Total Variable cost	B	41.00	33.00	39.90
Contribution Margin per unit	C=A-B	44.00	64.00	51.10
Mixing minutes per unit	D	4.00	2.50	3.00
Contribution Margin per minute	E=C/D	11.00	25.60	17.03
Ranking		III	I	II
(based on Contribution Margin per minute)
Monthly Demand (Units)	F	1,500	2,000	500
Hours Required	G=FXD	6,000	5,000	1,500
Hours allocated based on ranking	H	4,000	5,000	1,500
Maximum available minutes per month is 10500 minutes
Units to be production to maximise net operating income	I =H/D	1,000	2,000	500
Comtribution	J =I X C	44,000	128,000	25,550
Total Contribution Margin		197,550