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 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 G9 S5 $ 160 $112 $ 210 Selling price Variable costs 96 85 144 1. Calculate the contribution margin per pound for each of the three products Contribution margin per pound Product K1 Product S5 Product G9 4 6 Contribution margin per pound Order in which products should be produced and filled First Third Second

Explanation / Answer

Calculation of contribution margin per pound direct material

K1

S5

G9

Selling price

160

112

210

less: variable cost

-96

-85

-144

Contribution

64

27

66

Direct material in pounds

4

3

6

Contribution margin per pound

16

9

11

Ranking

    1 st

3rd

2nd

Calculation of contribution margin per pound direct material

K1

S5

G9

Selling price

160

112

210

less: variable cost

-96

-85

-144

Contribution

64

27

66

Direct material in pounds

4

3

6

Contribution margin per pound

16

9

11

Ranking

    1 st

3rd

2nd

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