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
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 $ 240 $ 350 $ 300 Variable expenses: Direct materials 32 80 40 Other variable expenses 136 130 185 Total variable expenses 168 210 225 Contribution margin $ 72 $ 140 $ 75 Contribution margin ratio 30 % 40 % 25 % The same raw material is used in all three products. Barlow Company has only 4,000 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 suppliers 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. Compute the amount of contribution margin that will be obtained per pound of material used in each product. 2a. Compute the amount of contribution margin on each product. 2b. Which order would you recommend that the company work on next weekthe orders for product A, product B, or product C? Product A Product B Product C 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?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-text-image.webp)
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Step: 3
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started