Question

Childress Company produces three products, K1, S5, and G9. Each product uses the same type of direct material. K1 uses 3.7 pounds of the material, S5 uses 3.4 pounds of the material, and G9 uses 6.1 pounds of the material. Demand for all products is strong, but only 44,500 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:
Calculate the contribution margin per pound for each of the three products.

Answer 1

Answer:

                                                      K1               S5                  G9

                                                       $                    $                 $

Contribution per pound           17.51           5.11      17.99

Explanation:

Contribution is he excess of selling price over variable cost. The following relationships would help in solving the question:

The contribution per Selling price - variable cost

The contribution per pound of a material = Contribution per unit/ Material per unit

                                                      K1               S5                  G9

                                                       $                    $                 $

Selling price                           155.8               108.92          202.55

Variable cost                             (91.00)          ( 90.00)         (136.00)

Contribution per unit                 64.8       18.92          66.55

Material per unit                            3.7             3.4               6.1

Contribution per pound           17.51           5.11      17.99