Exercise 7-8 Utilization of a Constrained Resource [LO7-5, LO7-6] 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 $300 $440 $360 Selling price Variable expenses: Direct materials 30 66 154 220 36 Other variable expenses 150 198 Total variable expenses 180 234 Contribution margin $120 $220 $126 Contribution margin ratio 40% 50% 35% The same raw material is used in all three products. Barlow Company has only 4,600 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 $6 per pound. Required: 1. Compute the amount of contribution margin that will be obtained per pound of material used in each product. B Contribution margin per unit Direct material cost per unit Direct material cost per pound Pounds of material required per unit Contribution margin per pound
Exercise 7-8 Utilization of a Constrained Resource [LO7-5, LO7-6] 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 $300 $440 $360 Selling price Variable expenses: Direct materials 30 66 154 220 36 Other variable expenses 150 198 Total variable expenses 180 234 Contribution margin $120 $220 $126 Contribution margin ratio 40% 50% 35% The same raw material is used in all three products. Barlow Company has only 4,600 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 $6 per pound. Required: 1. Compute the amount of contribution margin that will be obtained per pound of material used in each product. B Contribution margin per unit Direct material cost per unit Direct material cost per pound Pounds of material required per unit Contribution margin per pound
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question #3
![Exercise 7-8 Utilization of a Constrained Resource [LO7-5, L07-6]
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
$300
Selling price
Variable expenses:
Direct materials
Other variable expenses
Total variable expenses
$440
$360
30
66
36
150
154
198
180
220
234
Contribution margin
$120
$220
$126
Contribution margin ratio
40%
50%
35%
The same raw material is used in all three products. Barlow Company has only 4,600 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 $6 per pound.
Required:
1. Compute the amount of contribution margin that will be obtained per pound of material used in each product.
A
B
Contribution margin per unit
Direct material cost per unit
Direct material cost per pound
Pounds of material required per unit
Contribution margin per pound](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ff8151a55-1f97-4293-9574-706e6f6ba5ac%2Fbb36c3b7-a58a-4f71-bf10-71d4ef29eb71%2Fbce238r_processed.png&w=3840&q=75)
Transcribed Image Text:Exercise 7-8 Utilization of a Constrained Resource [LO7-5, L07-6]
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
$300
Selling price
Variable expenses:
Direct materials
Other variable expenses
Total variable expenses
$440
$360
30
66
36
150
154
198
180
220
234
Contribution margin
$120
$220
$126
Contribution margin ratio
40%
50%
35%
The same raw material is used in all three products. Barlow Company has only 4,600 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 $6 per pound.
Required:
1. Compute the amount of contribution margin that will be obtained per pound of material used in each product.
A
B
Contribution margin per unit
Direct material cost per unit
Direct material cost per pound
Pounds of material required per unit
Contribution margin per pound
Transcribed Image Text:3. A foreign supplier could furnish Barlow with additional stocks of the raw material at a substantial premium over the usual price. If there is unfilled demand for all three products, what is the highest price that Barlow Company should be
willing to pay for an additional pound of materials?
Maximum amount
per pound
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