Question

Exercise 10-7 Sales mix LO P3 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 3 pounds of the material, and G9 uses 6 pounds of the material. Demand for all products is strong, but only 50,000 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 $ 160 $ 112 $ 210 Variable costs 96 85 144 Calculate the contribution margin per pound for each of the three products. Orders for which product should be produced and filled first, then second, and then third?

Answer 1

Product K1 S5 G9

$ $ $

Contribution per pound 16 9 11

Ranking for production 1st 3rd 2nd

Step-by-step explanation:

Product K1 S5 G9

$ $ $

Selling price 160 112 210

Variable cost (96) (85) (144)

Contribution per unit 64 27 96

Material per unit (pounds) 4 3 6

Contribution per pound* 16 9 11

Ranking for production 1st 3rd 2nd

*Contribution per pound= contribution per unit/ material per in pounds