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

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Answer:

The contribution margin per pound for each of the three products is :

K1 = $16.20

S5 = $8.60

G9 = $10.70

Explanation:

First Calculate the Contribution per margin for for the 3 products.

                                                  K1                        S5                      G9

Selling Price                         $155.80               $108.92             $205.55

Less Variable Costs             ($91.00)               ($90.00)            ($136.00)

Contribution                          $64.80                 $18.92               $69.55

Then determine the contribution per pound as follows :

                                                  K1                        S5                      G9

Contribution                          $64.80                 $18.92               $69.55

Material Usage per unit      4 pounds            2.2 pounds       6.5 pounds

Contribution per pound       $16.20                  $8.60                $10.70

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