Chip Company produces three products, Kin, Ike, and Bix. Each product uses
the same direct material. Kin uses 4.1 pounds of the material, Ike uses 3.7
pounds of the material, and Bix uses 6.5 pounds of the material. Selling price
per unit and variable costs per unit of each product follow.
'
Kin Ike Bix
Selling price per unit $
151.60
$
119.52
$
216.25
Variable costs per unit 86.00 84.00 148.00
(a)'Compute contribution margin per pound of material for each product.'(b)'If
demand is limited, list the three products in the order in which management
should produce and meet demand.
Product Contribution Margin
Kin Ike Bix
Contribution margin per unitselected
answer correct
$65.60selected
answer correct
$35.52selected
answer correct
$68.25selected
answer correct
Pounds per unitselected answer
correct
4.10selected
answer correct
3.70selected
answer correct
6.50selected
answer correct
Contribution margin per pound $16.00selected
answer correct
$9.60selected
answer correct
$10.50selected
answer correct
Order in which management should
produce and meet demand:
Firstselected
answer correct
Thirdselected
answer correct
Secondselected
answer correct
Explanation
(a)
Product Contribution Margin Kin Ike Bix
Selling price per unit $
151.60
$
119.52
$
216.25
Variable costs per unit 86.00 84.00 148.00
Contribution margin per unit 65.60 35.52 68.25
Pounds of material per unit ÷4.10 ÷3.70 ÷6.50
Contribution margin per pound $ 16.00 $ 9.60 $ 10.50
