Check my work Barlow Company manufactures three products -A, B. and C. The selli
ID: 2536744 • Letter: C
Question
Check my work 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 Selling price Variable expenses 518 S 300 $248 ped Direct materials 28 98 30 Other variable expenses Total variable expenses Contribution margin 128 128 150 149 I21 18 40 s se 60 22% ??% 25% Contribution margin ratio The same raw material Is used in all three products. Barlow Company has only 6,750 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 productis) to concentrate on next week in filling its backlog of orders. The material costs $10 per pound Phint 1. Calculate the contribution margin per pound of the constraining resource for each product. erences 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 6750 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 ean when using the 63750 pounds of raw material on hand? 4. A foreign supplier could furnish Barlow with addisional stocks of the raw material at a substantial premium over the usual pice. Assurnin product line and that the company has used its 6750 pounds of raw material in an o what is the highest price Barlow Company should be willing to pay for an additional pound of g Barlow's estimated customer demand is 500 units per Complete this question by entering your answers in the tabs below.Explanation / Answer
1.
Working:
2.
If the demand for the products is unimited, the available material of 6,750 pounds should be used for producing Product A or Product C as this will give the maximum contribution margin per pound of material.
The total contribution earned = $135,000 (6,750 x $20)
3. If the maximum demand per product is 500 units the material should be sued in the following way.
Working:
4.
A B C Contribution margin per pound 20 10 20