Barlow Company manufactures three products: A, B, and C. The selling price, vari
ID: 2456870 • Letter: B
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:
Selling Price: A: $ 280 B: 400 C: 360
Variable Expenses:
Direct Materials A: $14 B: 56 C: 21
Other Variable expenses A: 154 B: 144 C: 213
Total Variable expenses A: 168 B: 200 C: 234
Contribution Margin A: 112 B: 200 C: 126
Contribution margin ratio A: 40% B: 50% C: 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 filling its backlog of orders. The material costs $7 per pound.
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
Direct material cost per unit
Direct material cost per pound
Pounds of material required per unit
contribution margin per pound
Compute the amount of contribution margin on each product.
A B C
Contribution margin per pound
pounds of material available
total contribution margin
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:
Selling Price: A: $ 280 B: 400 C: 360
Variable Expenses:
Direct Materials A: $14 B: 56 C: 21
Other Variable expenses A: 154 B: 144 C: 213
Total Variable expenses A: 168 B: 200 C: 234
Contribution Margin A: 112 B: 200 C: 126
Contribution margin ratio A: 40% B: 50% C: 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 filling 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. A B C
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.
A B C
Contribution margin per pound
pounds of material available
total contribution margin
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
Explanation / Answer
maximum price shall be cost plus margin ratio
Contibution margin per pounnd of material A B C 1 contrbn margin pu 112 200 126 2 direct material cost pu 14 56 21 3 Material cost per pound 7 7 7 4 pounds of mat required pu (2)/(3) 2 8 3 5 contribn margin per pound (1)/(4) 56 25 42 Total contribution margin A B C 1 Contribn margin per pound 56 25 42 2 pounds of material available 4300 4300 4300 3 Total cn margin (1)*(2) 240800 107500 180600Related Questions
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