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 $180 $ 240 S 240 Variable expenses Direct materials 18 72 27 Other variable expenses Total variable expenses Contribution margin Contribution margin ratio 126 144 36 20% 96 168 $ 72 204 S 36 30% 15% The same raw material is used in all three products. Barlow Company has only 5,400 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 $9 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

Explanation / Answer

Column1 Column2 Column3 Column4 Column5 Column6 Column7 A B C Contribution margin per unit 36 72 36 direct material cost per unit 18 72 27 direct materials cost per pound 9 9 9 pounds of materials required 2 8 3 per unit contribution margin per pound 18 9 12 2a) Column1 Column2 Column3 Column4 Column5 Column6 A B C contribution margin per pound 18 9 12 pounds of material avialable 5,400 5,400 5,400 total contribution margin 97200 48600 64800 Column1 Column2 2b) Product A 1 Product B 3 Product C 2 27 per pound product A Maximum amount 18 product B 21 product C

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