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Question - Rodham Inc. manufactures two products (A & B). Both products include emitrol and ullocide as part of the materials for productions. The costs below are computed at a monthly capacity level of 10,000 units of each product. Rodham has more demand for each of the two products than it can meet. It as been operating at capacity for the last year.
Product A
Product B
Sales price per unit
525
960
Variable cost per unit
225
460
Common fixed costs per unit
22
45
Ounces of emitrol needed per unit
1
50
Ounces of ullocide needed per unit
4
5
1. What is the contribution margin per unit for Product A?
2. What is the contribution margin per unit for Product B?
3. Rodham has learned that there is a shortage of ullocide. Next month, only 5000 ounces of ullocide will be available for use. Which product should Rodham produce, given these facts? Type just A or B.
4. Assume the limitation stated in question 3. What is the projected total contribution margin for Rodham next month if they choose to only produce Product A?
5. Assume the limitation stated in question 3. What is the projected total contribution margin for Rodham next month if they choose to only produce Product B?
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