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: 22-444 Other variable expenses Total variable expenses Direct materials Contribution margin Contribution margin ratio Product A B C $ 180 $ 270 $ 240 102 126 Required 1 Required 2 Required 3 Maximum contribution margin 80 30% 90 170 $ 54 $ 100 $ 60 37% 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. Complete this question by entering your answers in the tabs below. < Required: 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 earn when using the 6,000 pounds of raw material on hand? 32 3. Assuming that 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? 148 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 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? 180 Required 4 25% Required 2 Assuming that 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? Required 4

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: 22-444 Other variable expenses Total variable expenses Direct materials Contribution margin Contribution margin ratio Product A B C $ 180 $ 270 $ 240 102 126 Required 1 Required 2 Required 3 Maximum contribution margin 80 30% 90 170 $ 54 $ 100 $ 60 37% 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. Complete this question by entering your answers in the tabs below. < Required: 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 earn when using the 6,000 pounds of raw material on hand? 32 3. Assuming that 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? 148 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 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? 180 Required 4 25% Required 2 Assuming that 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? Required 4

Principles of Cost Accounting

17th Edition

ISBN:9781305087408

Author:Edward J. Vanderbeck, Maria R. Mitchell

Publisher:Edward J. Vanderbeck, Maria R. Mitchell

Chapter4: Accounting For Factory Overhead

Section: Chapter Questions

Problem 4P: Using the data in P4-2 and Microsoft Excel: 1. Separate the variable and fixed elements. 2....

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