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 $240 $360 $320 Variable expenses: Direct materials 21 63 28 Other variable expenses Total variable expenses Contribution margin Contribution margin ratio 147 168 $ 72 153 216 $144 212 240 $ 80 30% 40% 25% 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 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

Explanation / Answer

1) A B C Contribution margin per unit 72 144 80 direct material cost per unit 21 63 28 direct material cost per pound 7 7 7 pounds of material required per unit 3 9 4 contribution margin per pound 24 16 20 2-a) A B C Contribution margin per pound 24 16 20 pounds of material available 6000 6000 6000 total contribtuion margin 144000 96000 120000 2-b) product A 3) Maximum amount 31 per pound

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