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bachelor in business administration
Polytechnic State University Sanluis
Jan-2006 - Nov-2010
CPA
Polytechnic State University
Jan-2012 - Nov-2016
Professor
Harvard Square Academy (HS2)
Mar-2012 - Present
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):
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|
 |
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% |
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 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.
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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?
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