Question

Childress Company produces three products, K1, S5, and G9. Each product uses the same type of direct material. K1 uses 4.5 pounds of the material, S5 uses 2.9 pounds of the material, and G9 uses 5.6 pounds of the material. Demand for all products is strong, but only 44,500 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	$	167.65			$	113.07			$	210.76
Variable costs		97.00				89.00				143.00

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? (Round your answers to 2 decimal places.)

Answer 1

Answer -

1) Contribution margin per unit = Selling price - variable cost

2) Contribution margin per pound = Contribution margin per unit / Pounds per unit

(3) The product with highest Contribution margin per pound should be ranked first.

Particulars	Product K1	Product S5	Product G9
Selling price	167.65	113.07	210.76
Unit variable cost	97.00	89.00	143.00
Cont. margin per unit	70.65	24.07	67.76
Pounds per unit	4.5	2.9	5.6
Contribution margin per pound	15.70	8.30	12.10
ORDER FILLED	1st	3rd	2nd