?

Managerial Accounting

Free Version

Upgrade subject to access all content

Moderate

Fragrance Inc. Constrained Resource: What is the CM Per Ounce?

MGRACT-KAHABZ

Fragrances Inc. (FI) makes three types of perfumes, all of which require a special orchid oil. Due to heavy pesticide use, the bees that pollinate this rare flower are dying off and supplies are limited.

For the current period, FI can only obtain 3,000 ounces of orchid oil. What is the contribution margin per ounce of orchid oil for Orchid Heaven?

Orchid Heaven Exotic Whiff Wild Times
Sales price per bottle \$75.00 \$90.00 \$115.00
Variable costs \$52.50 \$54.00 \$57.50
Ounces required per bottle 0.10 ounces 0.25 ounces 0.50 ounces
Market demand, bottles 10,000 4,000 3,000
A

\$22.50

B

\$225.00

C

\$2.25

D

\$7.50