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chapter 7 Supplement Solutions acct 210

# chapter 7 Supplement Solutions acct 210 - 13-5 Exam Point...

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A B C Selling Price 180 \$ 270 \$ 240 \$ Less 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% Barlow Company Product Given The Constrained Resource is: ‘pounds’ of Raw Materials used Exam Point 13-5

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A B C Selling Price 180 \$ 270 \$ 240 \$ Less 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% Barlow Company Product Given If asked which products should be produced before others, DO NOT go for the sucker’s answer which would be “B” because the SP per unit is highest; or “B” because the CM per unit is highest. Or “B” because the CM ratio is highest. Exam Point 13-5
A B C 1) Direct Materials Cost/unit per 24 \$ 72 \$ 32 \$ 2) Cost per Pound (given) 8 \$ 8 \$ 8 \$ 3) Pounds Required Per Unit 3 lbs. ? ? (#1 divided by #2) 4) Contribution Margin per Unit \$54 \$108 \$60 5) Contribution Margin (per lbs.) \$18 \$12 \$15 Since the Constrained Resource is: ‘pounds’ of Raw Materials used, find the number of pounds that is required to produce each product unit. To do this, divide the RM cost per product unit by the cost per pound of RM. For Product A: If the Direct Material cost per unit of product A is \$24, and the cost of RM ‘per pound’ is \$8, it follows that it must require 3 pounds of RM to make each unit of product A 13-5

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A B C 1) Direct Materials Cost/unit per 24 \$ 72 \$ 32 \$ 2) Cost per Pound (given) 8 \$ 8 \$ 8 \$ 3) Pounds Required Per Unit 3 lbs. 9 lbs. (#1 divided by #2) 4) Contribution Margin per Unit \$54 \$108 \$60 5) Contribution Margin (per lbs.) \$18 \$12 \$15 For Product B: If the Direct Material cost per unit of product B is \$72, and the cost of RM ‘per pound’ is \$8, it follows that it must require 9 pounds of RM to make each unit of product B Since the Constrained Resource is: ‘pounds’ of Raw Materials used, find the number of pounds that is required to produce each product unit. To do this, divide the RM cost per product unit by the cost per pound of RM. 13-5
A B C 1) Direct Materials Cost/unit per 24 \$ 72 \$ 32 \$ 2) Cost per Pound (given) 8 \$ 8 \$ 8 \$ 3) Pounds Required Per Unit 3 lbs. 9 lbs. 4 lbs. (#1 divided by #2) 4) Contribution Margin per Unit \$54 \$108 \$60 5) Contribution Margin (per lbs.) \$18 \$12 \$15 For Product C: If the Direct Material cost per unit of product C is \$32, and the cost of RM ‘per pound’ is \$8, it follows that it must require 4 pounds of RM to make each unit of product C Since the Constrained Resource is: ‘pounds’ of Raw Materials used, find the number of pounds that is required to produce each product unit. To do this, divide the RM cost per product unit by the cost per pound of RM. 13-5

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3) Pounds Required Per Unit 3 lbs. 9 lbs. 4 lbs. (#1 divided by #2) 4) Contribution Margin per Unit \$54 \$108 \$60 5) Contribution Margin (per lbs.) \$18 \$12 \$15 Since each product delivers some Contribution Margin per unit sold, and since each product unit requires a given quantity of the scarce RM, determine which finished product will contribute the greatest amount per pound of RM consumed to make that product.
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chapter 7 Supplement Solutions acct 210 - 13-5 Exam Point...

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