Question

Childress Company produces three products, K1, S5, and G9. Each product uses the same type of direct material. K1 uses 5 pounds of the material, S5 uses 2.7 pounds of the material, and G9 uses 5.3 pounds of the material. Demand for all products is strong, but only 52,900 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 $ 172.00 $ 100.49 $ 189.65 Variable costs 89.00 77.00 134.00 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:

Calculate the contribution margin per pound for each of the three products.

• K1 = $17.80 per lb
• S5 = $8.70 per lb
• G9 = $10.50 per lb

Orders for which product should be produced and filled first, then second, and then third?

• K1 orders should be placed first, G9 orders should be placed second and S5 orders should be placed last.

Explanation:

52,900 pounds of material are available

• K1 uses 5 pounds of the material
• S5 uses 2.7 pounds of the material
• G9 uses 5.3 pounds of the material

contribution margin per unit:

• K1 = sales price - variable costs = $172 - $89 = $89
• S5 = $100.49 - $77 = $23.49
• G9 = $189.65 - $134 = $55.65

contribution margin per pound of material:

• K1 = $89 / 5 lbs = $17.80 per lb
• S5 = $23.49 / 2.7 lbs = $8.70 per lb
• G9 = $55.65 / 5.3 lbs = $10.50 per lb