7 Skipped Barlow Company manufactures three products: A, B and C. The selling price, variable costs...

 

Transcribed Image Text:

7 Skipped Barlow Company manufactures three products: A, B and C. The selling price, variable costs and contribution margin for one unit of each product follow: Selling price Less: Variable expenses: Direct materials Direct labour Other variable expenses Total variable expenses Contribution margin Product A B C $116.00 $180.00 $150.00 16.00 55.00 22.00 12.60 12.60 12.60 54.60 49.00 73.50 83.20 116.60 108.10 $ 32.80 $ 63.40 $ 41.90 The same raw material is used in all three products and costs $4 per kilogram. Barlow Company has only 6,000 kilograms of material on hand and will not be able to obtain any more material 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. Direct labour costs $14 per hour. 7 Required: 1. Compute the amount of contribution margin that will be obtained per kilogram of material used in each product. (Do not round Intermediate calculations. Round your answers to 2 decimal places.) Contribution margin per kilogram Skipped A B C 2. Which orders would you recommend that the company work on next week-the orders for product A, product B or product C? O Product A O Product B O Product C 3. A foreign supplier could furnish Barlow with additional stocks of the raw material at a substantial premium over the usual price. If there is unfilled demand for all three products, what is the highest price that Barlow Company should be willing to pay for an additional kilogram of materials? (Do not round Intermediate calculations. Round your answer to 2 decimal places.) Highest price per kilogram 4. Assume that direct labour becomes a constraint instead of direct materials. How will your answer to Requirement (2) above change? O Product A O Product B O Product C 7 Skipped Barlow Company manufactures three products: A, B and C. The selling price, variable costs and contribution margin for one unit of each product follow: Selling price Less: Variable expenses: Direct materials Direct labour Other variable expenses Total variable expenses Contribution margin Product A B C $116.00 $180.00 $150.00 16.00 55.00 22.00 12.60 12.60 12.60 54.60 49.00 73.50 83.20 116.60 108.10 $ 32.80 $ 63.40 $ 41.90 The same raw material is used in all three products and costs $4 per kilogram. Barlow Company has only 6,000 kilograms of material on hand and will not be able to obtain any more material 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. Direct labour costs $14 per hour. 7 Required: 1. Compute the amount of contribution margin that will be obtained per kilogram of material used in each product. (Do not round Intermediate calculations. Round your answers to 2 decimal places.) Contribution margin per kilogram Skipped A B C 2. Which orders would you recommend that the company work on next week-the orders for product A, product B or product C? O Product A O Product B O Product C 3. A foreign supplier could furnish Barlow with additional stocks of the raw material at a substantial premium over the usual price. If there is unfilled demand for all three products, what is the highest price that Barlow Company should be willing to pay for an additional kilogram of materials? (Do not round Intermediate calculations. Round your answer to 2 decimal places.) Highest price per kilogram 4. Assume that direct labour becomes a constraint instead of direct materials. How will your answer to Requirement (2) above change? O Product A O Product B O Product C