Question

Exercise 12-8 Volume Trade-Off Decisions [LO12-5, LO12-6] Barlow Company manufactures three products—A, B, and C. The...

Exercise 12-8 Volume Trade-Off Decisions [LO12-5, LO12-6]

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 $ 180 $ 240 $ 220 Variable expenses: Direct materials 18 72 30 Other variable expenses 126 96 140 Total variable expenses 144 168 170 Contribution margin $ 36 $ 72 $ 50 Contribution margin ratio 20 % 30 % 23 %

The same raw material is used in all three products. Barlow Company has only 5,400 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 product(s) to concentrate on next week in filling its backlog of orders. The material costs $6 per pound.

Required: 1. Calculate the contribution margin per pound of the constraining resource for 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 5,400 pounds of raw material on hand?

3. Assuming that Barlow’s estimated customer demand is 600 units per product line, what is the maximum contribution margin the company can earn when using the 5,400 pounds of raw material on hand?

4. A foreign supplier could furnish Barlow with additional stocks of the raw material at a substantial premium over the usual price. Assuming Barlow’s estimated customer demand is 600 units per product line and that the company has used its 5,400 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?

Homework Answers

Answer #1

1) Contribution margin per pound

A B C
Contribution margin 36 72 50
Pound per unit 3 12 5
Contribution margin per pound 12 6 10

2) Total Contribution margin = 5,400*33 = $178,200

3) Total Contribution margin

Pound Unit Contribution margin
A 600*3 = 1800 600 1800*12 = 21600
C 600*5 = 3000 600 3000*10 = 30000
B 600 100 1200*6 = 7200
Total 5,400

Total Contribution margin = 58,800

4) Highest price = 6+6 = 12 per pound

Please give me a Thumbs up ?.Thanks!!

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Exercise 12-8 Volume Trade-Off Decisions [LO12-5, LO12-6] Barlow Company manufactures three products—A, B, and C. The...
Exercise 12-8 Volume Trade-Off Decisions [LO12-5, LO12-6] 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 $ 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...
Barlow Company manufactures three products—A, B, and C. The selling price, variable costs, and contribution margin...
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 $ 180 $ 240 $ 220 Variable expenses: Direct materials 18 72 30 Other variable expenses 126 96 140 Total variable expenses 144 168 170 Contribution margin $ 36 $ 72 $ 50 Contribution margin ratio 20 % 30 % 23 % The same raw material is used in all three...
Barlow Company manufactures three products—A, B, and C. The selling price, variable costs, and contribution margin...
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 $ 150 $ 240 $ 200 Variable expenses: Direct materials 12 48 18 Other variable expenses 108 120 152 Total variable expenses 120 168 170 Contribution margin $ 30 $ 72 $ 30 Contribution margin ratio 20 % 30 % 15 % The same raw material is used in all three...
Barlow Company manufactures three products—A, B, and C. The selling price, variable costs, and contribution margin...
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 $ 160 $ 270 $ 230 Variable expenses: Direct materials 16 80 24 Other variable expenses 108 90 152 Total variable expenses 124 170 176 Contribution margin $ 36 $ 100 $ 54 Contribution margin ratio 23 % 37 % 23 % The same raw material is used in all three...
Barlow Company manufactures three products: A, B, and C. The selling price, variable costs, and contribution...
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 $ 180 $ 270 $ 240 Variable expenses: Direct materials 24 72 32 Other variable expenses 102 90 148 Total variable expenses 126 162 180 Contribution margin $ 54 $ 108 $ 60 Contribution margin ratio 30 % 40 % 25 % The same raw material is used in all...
Barlow Company manufactures three products: A, B, and C. The selling price, variable costs, and contribution...
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 $ 150 $ 240 $ 200 Variable expenses: Direct materials 12 48 18 Other variable expenses 108 120 152 Total variable expenses 120 168 170 Contribution margin $ 30 $ 72 $ 30 Contribution margin ratio 20 % 30 % 15 % The same raw material is used in all...
Barlow Company manufactures three products: A, B, and C. The selling price, variable costs, and contribution...
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 $ 210 $ 330 $ 320 Variable expenses: Direct materials 21 63 28 Other variable expenses 147 168 244 Total variable expenses 168 231 272 Contribution margin $ 42 $ 99 $ 48 Contribution margin ratio 20 % 30 % 15 % The same raw material is used in all...
Barlow Company manufactures three products: A, B, and C. The selling price, variable costs, and contribution...
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 $ 200 $ 300 $ 280   Variable expenses:     Direct materials 28 70 35     Other variable expenses 112 110 175   Total variable expenses 140 180 210   Contribution margin $ 60 $ 120 $ 70   Contribution margin ratio 30 % 40 % 25 %    The same raw material is used...
Exercise 11-12 Volume Trade-Off Decisions [LO11-5] Benoit Company produces three products—A, B, and C. Data concerning...
Exercise 11-12 Volume Trade-Off Decisions [LO11-5] Benoit Company produces three products—A, B, and C. Data concerning the three products follow (per unit): Product A B C Selling price $ 88.00 $ 72.00 $ 78.00 Variable expenses: Direct materials 26.40 18.00 9.00 Other variable expenses 26.40 36.00 45.60 Total variable expenses 52.80 54.00 54.60 Contribution margin $ 35.20 $ 18.00 $ 23.40 Contribution margin ratio 40 % 25 % 30 % The company estimates that it can sell 900 units of...
Barlow Company manufactures three products: A, B, and C. The selling price, variable costs, and contribution...
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 $ 190 $ 270 $ 240   Variable expenses:     Direct materials 18 54 24     Other variable expenses 115 108 156   Total variable expenses 133 162 180   Contribution margin $ 57 $ 108 $ 60   Contribution margin ratio 30 % 40 % 25 %    The same raw material is used...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT