marks Develop WindowHelp Chapter 12 Homework 6 3 Bariow Company manufactures thr
ID: 2571475 • Letter: M
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marks Develop WindowHelp Chapter 12 Homework 6 3 Bariow Company manufactures three products-A, B, and C. The seling price, variable costs, and comeribution margin each product folow riable expenses Contriution margia ratic The same raw material is used in all three products Barlow Company has only 6,000 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 productis) to concentrate on next week in filling its backlog of orders. The material costs $8 per pound. 1. Calculate the contribution margin per pound of the constraining resource for each product 2. Assuming that Barlow has unlimited demand for each of its three products, what is the maximum contribution margin the company can eam when using the 6,000 pounds of raw material on hand? 3. Assuming that Barlow's estimated customer demand is 500 units per product line, what is the maximum contribution company can earn when using the 6,000 pounds of raw material on hand? 4. A foreign supplier could furnish Barlow with additional stocks of the raw margin the at a substantial premlum over the usual price Assuming Barlow's estlmated customer demand is 500 units per product line and that the company has used its 6,000 pounds of raw material in an optimal fashion, what is the highest price Barlow Company should be willing to pay for an additional pound of materials? Complete this question by entering your answers in the tabs below. 2 3 4 5 6 8Explanation / Answer
1.
Contribution margin per pound:
Product A : 36/(16/8) = 18
Product B : 100/(80/8) = 10
Product C : 40/(32/8) = 10
2. The maximum contribution margin company can have is by selling product A. Which is = 18*6000 = 108000
3. Product A : 500 units
Material used = 500*2 = 1000 pounds
Contribution margin = 500*36 = 18000
Product C: 500 units
Material used = 500*40 = 20000
Contribution margin = 500*10 = 5000
Product B :
Material left = 6000-1000-2000 = 3000
Units = 3000/10 = 300
Contribution margin = 300*100 = 30000
So, net Contribution margin = 18000+20000+30000 = 68000
4. The highest price that the company can pay = 8+10 = 18 per pound
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