Dills Corporation has provided the following data concerning its two products--O24 and C50: $\begin{array}{lrr}
& \text { O24 } &{\text { C50 }} \
\text { Monthly unit demand } & 1,500 & 7,300 \
\text { Selling price } & \$ 425.00 & \$ 130.00 \
\text { Unit variable cost } & \$ 297.50 & \$ 78.00
\end{array}$ The total amount of the constrained resource available each month is 49,250 grams. Each unit of product O24 requires 17 grams of the constrained resource and each unit of product C50 requires 5 grams. What is the maximum contribution margin the company can earn per month?
A)$570,850
B)$475,225
C)$453,457
D)$438,250

Question

Dills Corporation has provided the following data concerning its two products--O24 and C50: $\begin{array}{lrr} 
& \text { O24 } &{\text { C50 }} \
\text { Monthly unit demand } & 1,500 & 7,300 \
\text { Selling price } & \$ 425.00 & \$ 130.00 \
\text { Unit variable cost } & \$ 297.50 & \$ 78.00
\end{array}$ The total amount of the constrained resource available each month is 49,250 grams. Each unit of product O24 requires 17 grams of the constrained resource and each unit of product C50 requires 5 grams. What is the maximum contribution margin the company can earn per month?
A)$570,850
B)$475,225
C)$453,457
D)$438,250

Quizplus · Accepted Answer

To find the maximum contribution margin, calculate the contribution margin per unit for each product (Selling price - Unit variable cost), then divide by the grams required per unit to find the contribution margin per gram. Allocate the constrained resource to the product with the highest contribution margin per gram until the resource is exhausted. Calculate the total contribution margin based on the allocation.

Dills Corporation Has Provided the Following Data Concerning Its Two