Barlow Company manufactures three products: A, B, and C. The selling price, vari

Question

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 $184 $258 $250
Variable expenses:
Direct materials 20 84 16
Other variable expenses 100 74 144
Total variable Expense 120 158 160
Contribution margin $64 $100 $90
Contribution margin ratio 34.78% 38.76% 36%

The same raw material is used in all three products. Barlow Company has only 5,000 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 supplier's plant. Management is trying to decide which product(s) to concentrate on next week in filling its backlog of orders. The material costs $2 per pound.


Requirement 1:
Compute the amount of contribution margin that will be obtained per pound of material used in each product. (Round your answers to 2 decimal places. Omit the "$" sign in your response.)

A B C
Contribution margin $ $ $

Explanation / Answer

Product A: Contribution margin = $64 Number of pounds used = 20/2 = 10 contribution margin per ound = 64/10 = $6.40 Product B: Contribution margin = $100 number of pounds used = 84/2 = 42 contribution margin per pound = 100/42 = $2.38 Product C: Condtribution margin = $90 number of pounds used = 16/2 = 8 contribution margin per pound = 90/8 = 11.25 answer: A: $6.40 B: $2.38 C: $11.25

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