Question

Childress Company produces three products, K1, S5, and G9. Each product uses the same type of direct material. K1 uses 3.1 pounds of the material, S5 uses 2.4 pounds of the material, and G9 uses 6.4 pounds of the material. Demand for all products is strong, but only 54,200 pounds of material are available. Information about the selling price per unit and variable cost per unit of each product follows.

K1 S5 G91
Selling price $147.39 $112.64 $215.56
Variable costs 95.00 92.00 149.00

Required:
Calculate the contribution margin per pound for each of the three products.

Answer 1

Product K1 = 16.9

Product S5 = 8.6

Product G9 = 10.4

Step-by-step explanation:

Product K1 Product S5 Product G9

Contribution a $52.39 $20.64 $66.56

($147.39 - $95.00) ($112.64 - 92.00) ($215.56 - $149.00)

Number of Material

Required Per Unit b 3.1 2.4 6.4

Contribution margin

per pound 16.9 8.6 10.4

c = (a ÷ b)

Order in which products

should be produced

and filled 1 3 2