Barlow Company manufactures three productsA, 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 6,600 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 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. Calculate the contribution margin per pound of the constraining resource for each product. (Hint: use the DM cost in the table and the cost per pound given in the additional information to calculate how many pounds are used by 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 6,600 pounds of raw material on hand?

3. Assuming that Barlows estimated customer demand is 500 units per product line, what is the maximum contribution margin the company can earn when using the 6,600 pounds of raw material on hand? (See the hint below if you need help.)

4. A foreign supplier could furnish Barlow with additional stocks of the raw material at a substantial premium over the usual price. Assuming Barlows estimated customer demand is 500 units per product line and that the company has used its 6,600 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?