Childress Company produces three products, K1, S5, and G9. Each product uses the

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.)

Contribution margin per pound Product K1 Product S5 Product G9 Sales Variable costs Contribution margin per pound Order in which products should be produced and filled:

Explanation / Answer

Since K1 gives the highest contribution per pound of direct material and since raw material availability is limited , therfore it is ranked number 1 in order of production followed by G9 and finally S5.

Product K1 Product S5 Product G9 Sales $ ( A)         155.80         108.92          205.55 Variable Cost $ ( B)            91.00           90.00          136.00 Contribution Margin $ (A-B)            64.80           18.92            69.55 Material usage (pound) per unit ( 'C)              4.00             2.20              6.50 Contribution margin per pound $ (A-B)/'C 16.2 8.6 10.7 Order of production 1 3 2

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.