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 Variable expenses: Direct materials Other variable expenses Total variable expenses Contribution margin Contribution margin ratio A $ 160 Product B $ 270 16 80 108 90 124 170 $36 $ 100 23% 37% C $ 240 32 148 180 $ 60 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 ble 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 $8 per pound. Required: 1. Calculate the contribution margin per pound of the constraining resource for each product. 2. Assuming Barlow has unlimited demand for each of its three products, what is the maximum contribution margin the company can earn when using the 6,000 pounds of raw material on hand? 3. Assuming Barlow's estimated customer demand is 500 units per product line, what is the maximum contribution margin the 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 material at a substantial premium over the usual price. Assuming Barlow's estimated customer demand is 500 units per product line and 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?
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 Variable expenses: Direct materials Other variable expenses Total variable expenses Contribution margin Contribution margin ratio A $ 160 Product B $ 270 16 80 108 90 124 170 $36 $ 100 23% 37% C $ 240 32 148 180 $ 60 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 ble 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 $8 per pound. Required: 1. Calculate the contribution margin per pound of the constraining resource for each product. 2. Assuming Barlow has unlimited demand for each of its three products, what is the maximum contribution margin the company can earn when using the 6,000 pounds of raw material on hand? 3. Assuming Barlow's estimated customer demand is 500 units per product line, what is the maximum contribution margin the 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 material at a substantial premium over the usual price. Assuming Barlow's estimated customer demand is 500 units per product line and 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?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text: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
Variable expenses:
Direct materials.
Other variable expenses
Total variable expenses
Contribution margin
Contribution margin ratio
A
$ 160
Product
B
$ 270
16
80
108
90
124
170
$36 $100
23%
37%
C
$240
32
148
180
$ 60
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 $8 per pound.
Required:
1. Calculate the contribution margin per pound of the constraining resource for each product.
2. Assuming Barlow has unlimited demand for each of its three products, what is the maximum contribution margin the company can
earn when using the 6,000 pounds of raw material on hand?
Required 1 Required 2 Required 3 Required 4
25%
3. Assuming Barlow's estimated customer demand is 500 units per product line, what is the maximum contribution margin the
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 material at a substantial premium over the usual price.
Assuming Barlow's estimated customer demand is 500 units per product line and 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?
Contribution margin per pound of the constrained resource
Complete this question by entering your answers in the tabs below.
Calculate the contribution margin per pound of the constraining resource for each product.
A
B
C
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