EXERCISE 9-6 Utilizing a Constrained Resource [LO2 - CC7, 8] Barlow Company manufactures three products: A, B. and C. The selline price, variable costs, and contribution margin for one unit of each product follow. Product B Seling price $110 $155 $140 Less: Variable expenses Direct materials 18 54 24 Direct labour 20 20 20 Other variable expenses 45 27 66 Total variable expenses 83 101 110 Contribution margin $27 $ 54 $ 30 The same raw material is used in all three products and costs $6 per kilogram. Barlow Company has only 5,000 kilograms of material on hand and will not be able to obtain any more material 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 filine its backlog of orders. Direct labour costs $12 per hour. Required: 1. Compute the amount of contribution margin that will be obtained per kilogram of material used in each product. 2. Which orders would you recommend that the company work on next week-the orders for product A, product B, or product C? Show computations. 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 kilogram of materials?
EXERCISE 9-6 Utilizing a Constrained Resource [LO2 - CC7, 8] Barlow Company manufactures three products: A, B. and C. The selline price, variable costs, and contribution margin for one unit of each product follow. Product B Seling price $110 $155 $140 Less: Variable expenses Direct materials 18 54 24 Direct labour 20 20 20 Other variable expenses 45 27 66 Total variable expenses 83 101 110 Contribution margin $27 $ 54 $ 30 The same raw material is used in all three products and costs $6 per kilogram. Barlow Company has only 5,000 kilograms of material on hand and will not be able to obtain any more material 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 filine its backlog of orders. Direct labour costs $12 per hour. Required: 1. Compute the amount of contribution margin that will be obtained per kilogram of material used in each product. 2. Which orders would you recommend that the company work on next week-the orders for product A, product B, or product C? Show computations. 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 kilogram of materials?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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![O McGraw-Hill Connect - ACCT X E Class ACCT 92 in Connect
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EXERCISE 9-6
Utilizing a Constrained Resource [LO2 – CC7, 8]
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
B
Selling price
$110
$155
$140
Less: Variable expenses:
Direct materials
18
54
24
Direct labour
20
20
20
Other variable expenses
45
27
66
Total variable expenses
83
101
110
Contribution margin
$27
$ 54
$ 30
The same raw material is used in all three products and costs $6 per kilogram. Barlow Company has only 5,000 kilograms
of material on
hand and will not be able to obtain any more material 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. Direct labour costs $12 per hour.
Required:
1. Compute the amount of contribution margin that will be obtained per kilogram of material used in each product.
2. Which orders would you recommend that the company work on next week-the orders for product A, product B, or product C? Show
computations.
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
kilogram of materials?
4. Assume that direct labour becomes a constraint instead of direct materials. How will your answer to Requirement (2) above change?
Page 436
EXERCISE 9 7
7:54 PM
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2 A 4x ENG
2020-11-10](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F55259130-739f-46f4-a99f-fa8e5278c402%2F30af440a-9bce-4f29-b97a-eb41fdfbf7f8%2Fmvhfqtr_processed.jpeg&w=3840&q=75)
Transcribed Image Text:O McGraw-Hill Connect - ACCT X E Class ACCT 92 in Connect
x M MHE Reader
x +
O A https://player-ui.mheducation.com/#/epub/sn_ed42c#epubcfi(%2F6%2F352[data-uuid-fa092cfe0e164b0fa7482dc9b5157d88]!%2F4%2F2[data
... O
li O
80%
uns oruer onouru ume speciar oruer ve uccepieu at unIs pricer
EXERCISE 9-6
Utilizing a Constrained Resource [LO2 – CC7, 8]
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
B
Selling price
$110
$155
$140
Less: Variable expenses:
Direct materials
18
54
24
Direct labour
20
20
20
Other variable expenses
45
27
66
Total variable expenses
83
101
110
Contribution margin
$27
$ 54
$ 30
The same raw material is used in all three products and costs $6 per kilogram. Barlow Company has only 5,000 kilograms
of material on
hand and will not be able to obtain any more material 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. Direct labour costs $12 per hour.
Required:
1. Compute the amount of contribution margin that will be obtained per kilogram of material used in each product.
2. Which orders would you recommend that the company work on next week-the orders for product A, product B, or product C? Show
computations.
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
kilogram of materials?
4. Assume that direct labour becomes a constraint instead of direct materials. How will your answer to Requirement (2) above change?
Page 436
EXERCISE 9 7
7:54 PM
O Type here to search
2 A 4x ENG
2020-11-10
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