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 A B C Selling price $ 180 $ 270 $ 240 Variable expenses: Direct materials 24 80 32 Other variable expenses 102 90 148 Total variable expenses 126 170 180 Contribution margin $ 54 $ 100 $ 60 Contribution margin ratio 30 % 37 % 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 $8 per pound. 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? 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?

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...

See similar textbooks

Related questions

Concept explainers

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
	A		B	C
Selling price	$	180		$	270		$	240
Variable expenses:
Direct materials		24			80			32
Other variable expenses		102			90			148
Total variable expenses		126			170			180
Contribution margin	$	54		$	100		$	60
Contribution margin ratio		30	%		37	%		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 $8 per pound.

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?

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?

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?

CHAPTER 13 ASSIGNMENT PART TWO
Saved
Help
Save & Exit
Submit
2
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
A
В
C
$ 180
$ 270
$ 240
Selling price
Variable expenses:
16
points
Direct materials
24
80
32
Other variable expenses
Total variable expenses
102
90
148
126
170
180
Print
Contribution margin
$ 54
$ 100
$ 60
30%
37%
25%
Contribution margin ratio
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 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?
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?
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?
Complete this question by entering your answers in the tabs below.
Mc
Graw
Hill
Education
< Prev
2 of 2
Next

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 4 steps with 3 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, operations-management and related others by exploring similar questions and additional content below.

Similar questions