Barlow Company manufactures three products: A, B, and C. The selling price, variable costs, and
contribution margin for one unit of each product follow:
Product
A B C Selling price $ 270 $ 360
$ 340 Variable expenses: Direct materials 36 72 42 Other variable expenses 126 108 179 Total variable expenses 162 180 221 Contribution margin $ 108 $ 180 $ 119 Contribution margin ratio 40 % 50 % 35 %
The same raw material is used in all three products. Barlow Company has only 4,200 pounds of raw material on hand and will not be able to obtain any more of it for several weeks due to a strike in its supplierâs plant. Management is trying to decide which product(s) to concentrate on next week in filling its backlog of orders. The material costs $6 per pound.
Required:
1. Compute the amount of contribution margin that will be obtained per pound of material used in each product.
A B C Contribution margin per unit $108 $180 $119 Direct material cost per unit Direct material cost per pound Pounds of material required per unit 0 0 0 Contribution margin per pound 0 0 0
2a. Compute the amount of contribution margin on each product
A B C Contribution margin per pound Pounds of material available Total contribution margin
2b. Which orders would you recommend that the company work on next weekâthe orders for product A, product B, or product C?
Product A Product B Product C
3. A foreign supplier could furnish Barlow with additional stocks of the raw material at a substantial premium over the usual price. If there is unfilled demand for all three products, what is the highest price that Barlow Company should be willing to pay for an additional pound of materials?
Maximum amount per pound
Barlow Company manufactures three products: A, B, and C. The selling price, variable costs, and
contribution margin for one unit of each product follow:
| Product | |||||||||||
| A | B | C | |||||||||
| Selling price | $ | 270 | $ | 360 | $ | 340 | |||||
| Variable expenses: | |||||||||||
| Direct materials | 36 | 72 | 42 | ||||||||
| Other variable expenses | 126 | 108 | 179 | ||||||||
| Total variable expenses | 162 | 180 | 221 | ||||||||
| Contribution margin | $ | 108 | $ | 180 | $ | 119 | |||||
| Contribution margin ratio | 40 | % | 50 | % | 35 | % | |||||
| The same raw material is used in all three products. Barlow Company has only 4,200 pounds of raw material on hand and will not be able to obtain any more of it for several weeks due to a strike in its supplierâs plant. Management is trying to decide which product(s) to concentrate on next week in filling its backlog of orders. The material costs $6 per pound. |
| Required: |
| 1. | Compute the amount of contribution margin that will be obtained per pound of material used in each product. | ||||||||||||||||||||||||
|
| 2a. | Compute the amount of contribution margin on each product
|
| 2b. | Which orders would you recommend that the company work on next weekâthe orders for product A, product B, or product C? | |||||||||||
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Related questions
Barlow Company manufactures three products: A, B, and C. Theselling price, variable costs, and contribution margin for one unitof each product follow: |
Product | |||||||||||
| A | B | C | |||||||||
| Sellingprice | $ | 180 | $ | 240 | $ | 240 | |||||
| Variableexpenses: | |||||||||||
| Direct materials | 18 | 72 | 27 | ||||||||
| Other variable expenses | 126 | 96 | 177 | ||||||||
| Totalvariable expenses | 144 | 168 | 204 | ||||||||
| Contribution margin | $ | 36 | $ | 72 | $ | 36 | |||||
| Contribution margin ratio | 20 | % | 30 | % | 15 | % | |||||
The same raw material is used in all three products. BarlowCompany has only 5,400 pounds of raw material on hand and will notbe able to obtain any more of it for several weeks due to a strikein its supplierâs plant. Management is trying to decide whichproduct(s) to concentrate on next week in filling its backlog oforders. The material costs $9 per pound. |
| Required: |
| 1. | Compute the amount of contribution margin that will be obtainedper pound of material used in each product. |
| 2a. | Compute the amount ofcontribution margin on each product. |
| 2b. | Which orders would you recommend that the company work on nextweekâthe orders for product A, product B, or product C? | ||||||
|
| 3. | A foreign supplier could furnish Barlow with additional stocksof the raw material at a substantial premium over the usual price.If there is unfilled demand for all three products, what is thehighest price that Barlow Company should be willing to pay for anadditional pound of materials? |
Barlow Company manufactures three products: A, B, and C. Theselling price, variable costs, and contribution margin for one unitof each product follow:
| Product | |||||||||||
| A | B | C | |||||||||
| Selling price | $ | 210 | $ | 330 | $ | 320 | |||||
| Variable expenses: | |||||||||||
| Direct materials | 21 | 63 | 28 | ||||||||
| Other variable expenses | 147 | 168 | 244 | ||||||||
| Total variable expenses | 168 | 231 | 272 | ||||||||
| Contribution margin | $ | 42 | $ | 99 | $ | 48 | |||||
| Contribution margin ratio | 20 | % | 30 | % | 15 | % | |||||
The same raw material is used in all three products. BarlowCompany has only 5,200 pounds of raw material on hand and will notbe able to obtain any more of it for several weeks due to a strikein its supplierâs plant. Management is trying to decide whichproduct(s) to concentrate on next week in filling its backlog oforders. The material costs $7 per pound.
Required:
1. Compute the amount of contribution margin that will beobtained per pound of material used in each product.
|
2a. Compute the amount of contribution margin on eachproduct.
| A | B | C | |
| Contribution Margin per pound | _______ | _______ | ______ |
| Pounds of material available | |||
| Total Contribution Margin |
2b. Which orders would you recommend that the company work onnext weekâthe orders for product A, product B, or product C?
| Product A | |
| Product B | |
| Product C |
3. A foreign supplier could furnish Barlow with additionalstocks of the raw material at a substantial premium over the usualprice. If there is unfilled demand for all three products, what isthe highest price that Barlow Company should be willing to pay foran additional pound of materials?
|
