Childress Company produces three products, K1. S5, and G9. Each product uses the same type of direct material. K1 uses 4.7 pounds of the material, S5 uses 2.8 pounds of the material, and G9 uses 5.6 pounds of the material. Demand for all products is strong, but only 58,600 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 $158.38 $114.80 $204.52

Variable costs 86.00 91.00 139.00

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

K1 has contribution of $15.40 per pound

S5 has contribution of $8.50 per pound

G9 has contribution of $11.70 per pound

Explanation:

The contribution per pound of each can be computed by first of all calculating contribution per unit of each of the products produced by Childress company, then dividing each contribution per product by the number of pounds of direct materials used by each product as shown below.

K1 S5 G9

Selling price $158.38 $114.80 $204.52

variable costs ($86.00) ($91.00) ($139.00)

Contribution per product $72.38 $23.80 $65.52

Material usage in pds 4.7 2.8 5.6

Contribution margin per pd $15.40 $8.50 $11.70