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 3.4 pounds of the material, and G9 uses 5.2 pounds of the material. Demand for all products is strong, but only 48,400 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 $ 178.15 $ 127.00 $ 214.40 Variable costs 103.00 93.00 152.00 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

Answer 1

Answer:

Childress Company

                                                             K1             S5           G9

a. Contribution margin per pound $16.70      $10.00    $12.00

b. Order of production

First, K1

Second G9

Third S5

Explanation:

a) Data and Calculations:

Pounds of materials available = 48,400

                                                           K1           S5           G9

Pounds of materials per unit           4.5           3.4           5.2

Selling price                               $ 178.15   $ 127.00 $ 214.40

Variable costs                              103.00       93.00    152.00

Contribution margin per unit      $75.15     $34.00   $62.40

Contribution margin per pound $16.70      $10.00    $12.00