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 Seling price Variable expenses: Direct materials 28 70 35 Other variable expenses Total variable expenses Contribution margin Contribution margin ratio 112 140 s 60 110 180 $120 175 210 S 70 30% 25% The same raw material is used in all three products. Barlow Company has only 5,600 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. Contribution margin per unit Direct material cost per unit Direct material cost per pound Pounds of material required per unit Contribution margin per pound 2Compute the amount of contribution margin on each product. margin per pound Pounds of material available Total contribution margin

Explanation / Answer

A B C Selling price 200 300 280 Variable Expenses Direct material 28 70 35 Other Variable Expenses 112 110 175 Total variable Expenses 140 180 210 Contribution Margin 60 120 70 Direct Material Cost per unit 28 70 35 Direct Material Cost per pound 7 7 7 Ponds of Material Required per unit 4 10 5 Contribution Margin per pound 15 12 14 Ranking I III II 2 Contribution Margin on each product Contribution Margin per pound 15 12 14 Pouns of material available 5600 5600 5600 Total Contribution Margin 84000 67200 78400 The company should work on Product A

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