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Selling price
Variable expenses:
Direct materials
Other variable expenses
Total variable expenses
Contribution margin
Contribution margin ratio
The same raw material is used in all three products. Barlow Company has only 5,700 pounds of raw material on
Required:
1. Compute the amount of contribution margin that will be obtained per pound of material used in each product.
2b. Which orders would you recommend that the company work on next week - the orders for
product A, product B, or product C?
The company should work first on Product A, then on Product C and then on Product B.
Answer 3
The company should not pay more than $ 20 per pound that is the contribution margin per
pound of Product B as it will be not profitable to pay more than that and if the material is more
expensive than $ 20 per pound, it will be profitable to eliminate the product.
le costs, and contribution margin for one unit of each product follow:
Product
A B C
210 320 240
16 64 24
110 96 132
126 160 156
84 160 84
40% 50% 35%
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
A B C
$ 42 $ 20 $ 28
2 8 3
84 160 84
rders for product A, product B, or product C?
ubstantial premium over the usual price. If there is unfilled demand for all three products, what is the highest price that Barlo
ue to a strike in its supplier's plant. Management is trying to decide which product(s) to concentrate on next week in filling its
the highest price that Barlow Company should be willing to pay for an additional pound of materials?
on next week in filling its backlog of orders. The materials cost $ 8 per pound.