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 Selling price $280 400 $ 360 Variable expenses Direct materials 14 56 21 Other variable expenses Total variable expenses Contribution margin Contribution margin ratio 154 168 $112 144 200 $200 234 126 40% 50% 35% The same raw material is used in all three products. Barlow Company has only 4,300 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 filing its backlog of orders. The material costs $7 per pound Required: 1. Compute the amount of contribution margin that will be obtained per pound of material used in each product Contribution margin per unit Direct material cost per unit Direct material cost per pound Pounds of material required per unit Contribution margin per pound 2a. Compute the amount of contribution margin on each product. Contribution margin per pound Pounds of material available Total contribution margin

Explanation / Answer

1 A B C Contribution margin per unit 112 200 126 Direct material cost per unit 14 56 21 Direct material cost per pound 7 7 7 pounds of material required per unit 2 8 3 Contribution margin per pound 56 25 42 2a A B C Contribution margin per pound 56 25 42 Pounds of material available 4300 4300 4300 Total contribution margin 240800 107500 180600 2b Order Product A Product C Product B 3 25 per pound

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