Barlow Company manufactures three products: A, B, and C. The selling price, variable costs, and...
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Accounting
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
$
360
$
320
Variable expenses:
Direct materials
24
72
32
Other variable expenses
120
108
176
Total variable expenses
144
180
208
Contribution margin
$
96
$
180
$
112
Contribution margin ratio
40
%
50
%
35
%
The same raw material is used in all three products. Barlow Company has only 4,400 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 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
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