1) compute the amount of CONTRIBUTION MARGIN that will be obtained per pound of material used in each product
Particular | product A | product B | product C |
CONTRIBUTION MARGIN PER UNIT(selling price×contribution margin ratio |
($200×30%) $60 |
($300×40%) $120 |
($280×25%) $70 |
Direct material cost per unit | $28 | $70 | $35 |
Direct material cost per pound | $7 | $7 | $7 |
Pound of material required per unit[direct material cost per unit/direct material cost per pound] |
[$28/$7] $4 |
[$70/$7] $10 |
[$35/$7] $5 |
CONTRIBUTION MARGIN PER pound[CONTRIBUTION MARGIN PER UNIT/pound of material required per unit] |
[$60/$4] $15 |
[$120/$10] $12 |
[$70/$5] $14 |
2a) compute the amount of CONTRIBUTION MARGIN on each product
Particular | product A | product B | product c |
(a)ParticularON MARGIN PER pound | $15 | $12 | $14 |
(b)material available of pounds | 5600 | 5600 | 5600 |
Total CONTRIBUTION MARGIN[(a)×(b)] | $84000 | $67200 | $78400 |
2b) order i recommend is product A because compare to product B and product c CONTRIBUTION MARGIN of product A is more
Therefore product A is recommended.
3)if there is unfilled demand for all three products, the maximum price that Barlow company should willing to pay for an additional pound of materials will be
Maximum amount= direct material cost per pound+CONTRIBUTION MARGIN PER pound of product A
= $7+$15
=$22 per pound
ALL THE BEST
PLEASE DO SUPPORT US
ANY doubt please comment below
Thank you
Barlow Company manufactures three products: A, B, and C. The selling price, variable costs, and contribution...
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