Question

Childress Company produces three products, K1, S5, and G9. Each product uses the same type of direct material. Kl uses 3.1 pounds of the material, S5 uses 2.4 pounds of the material, and G9 uses 6.7 pounds of the material. Demand for all products is strong, but only 41,000 pounds of material are available. Information about the selling price per unit and variable cost per unit of each product follows. K1 Selling price $144.74 Variable 97.00 costs SS $98.84 77.00 G91 $229.07 148.00 Required: 1. Calculate the contribution margin per pound for each of the three products, (Round your answers to 2 decimal places.) Contribution margin per pound Product K1 Product S5 Product G9 Contribution margin per pound Order in which products should be produced and filled

Answer 1

Sol: Step 1:Information Given Particulars Selling Price Per Unit Variable Costs per Unit $ $ Product K1 Product S5 Product G9 144.74 $ 98.84 $ 229.07 97.00 $ 77.00 $ 148.00 Direct Material Required for each product Particulars Direct Material Required for each unit product (In Pounds) Product K1 3.1 Product S5 2.4 Product G9 6.7 Total Direct Material Avaialble 41000 Step 2: Contribution per unit Particulars Selling Price Per Unit Variable Costs per Unit Contribution per unit $ $ $ Product K1 Product S5 Product G9 144.74 $ 98.84 $ 229.07 97.00 $ 77.00 $ 148.00 47.74 $ 21.84 $ 81.07 Step 3: Contribution Margin Per Direct Material Particulars Contribution per unit (Step 2) Direct Material Required Per Unit (in Pounds) - Step 1) Contribution Margin Per Pound $ Product K1 Product S5 Product G9 47.74 $ 21.84 $ 81.07 3.1 2.4 6.7 15.40 $ 9.10 $ 12.10 $ Rank (orderin which products should be produced and filled