The following are the selling price, variable costs, and contribution margin for one unit of each of Banner Company’s…

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The following are the selling price, variable costs, and contribution margin for one unit of each of Banner Company’s three products: A,

B, and C

Selling price

Variable costs:

Direct materials

Direct labour

Variable manufacturing overhead

Total variable cost

Contribution margin

Contribution margin ratio

A

$70.00

Contribution margin per labour hour

30.50

12.00

3.00

45.50

$24.50

A

35%

Product

B

$130.00

B

51.00

32.00

8.00

91.00

$39.00

Due to a strike in the plant of one of its competitors, demand for the company’s products far exceeds its capacity to produce.

Management is trying to determine which product(s) to concentrate on next week in filling its backlog of orders. The direct labour rate

is $8 per hour, and only 3,850 hours of labour time, are available each week.

Required:

1. Compute the amount of contribution margin that will be obtained per hour of labour time spent on each product. (Round your

intermediate calculations to 1 decimal place. Round your answers to 2 decimal places.)

30%

$ 8.52 $ 11.70 $

C

C

$180.00

114.00

24.00

6.00

144.00

$36.00

20%

7.20

2. Which orders would you recommend that the company work on next week-the orders for product A, product B, or product C?

Expert Answer:

Answer rating: 100% (QA)

To compute the amount of contribution margin obtained per hour of labor time spent on each product we need to divide the contribution margin by the la

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