Question

Childress Company produces three products, K1, S5, and G9. Each product uses the same type of direct material. K1 uses 4 pounds of the material, S5 uses 2.2 pounds of the material, and G9 uses 6.5 pounds of the material. Demand for all products is strong, but only 55,400 pounds of material are available. Information about the selling price per unit and variable cost per unit of each product follows. K1 S5 G9 Selling price $155.8 $108.92 $205.55 Variable costs 91.00 90.00 136.00 Required: 1. Calculate the contribution margin per pound for each of the three products. (Round your answers to 2 decimal places.)

Answer 1

K1 :$16.2 per pound

S5: $8.6 per pound

G9 :$10.7 per pound

Step-by-step explanation:

Contribution margin (per unit) is the selling price less the variable cost. Hence for each of the products, it is determined as follows:

K1 : 155.8-91.00 = 64.8

S5: 108.92 - 90.00 =18.92

G9 : 205.55 - 136.00 = 69.55

Contribution margin per pound:

Contribution per pound = contribution per unit/ material required per pound

K1 : =64.8 /4 =$16.2 per pound

S5: = 18.92 /2.2 = $8.6 per pound

G9 : 69.55 /6.5=$10.7 per pound