Text: Company products - A, B, and C. The selling price, variable costs, and contribution margin for one unit of each product follow:
Product A: Selling price - $180, Variable expenses - Direct materials $24, Other variable expenses $102, Total variable expenses $126, Contribution margin $54.
Product B: Selling price - $280, Variable expenses - Direct materials $80, Other variable expenses $100, Total variable expenses $180, Contribution margin $100.
Product C: Selling price - $240, Variable expenses - Direct materials $32, Other variable expenses $148, Total variable expenses $180, Contribution margin $60.
Contribution margin ratio:
Product A - 30%
Product B - 35.71%
Product C - 25%
Stake in suppliers' plant: Management is trying to decide which products to concentrate on next week in filling its backlog of orders. The material cost is $8 per pound. Assuming a demand of 500 units per product line and that the company has used its 6,600 pounds of raw material in an optimal fashion, what is the highest price the company should be willing to pay for an additional pound of materials?
Multiple Choice:
$18