Q1) MD Widgets produces three different product lines, Model X, Model Y, and Model Z. Considerable market demand exists for all models. Given below is per unit data apply:
| |
Model X |
Model Y |
Model Z |
| Selling price |
$80 |
$90 |
$100 |
| Direct materials |
$30 |
30 |
30 |
| Direct labor ($10 per hour) |
$15 |
15 |
20 |
| Variable support costs ($5 per machine-hour) |
$5 |
10 |
10 |
| Fixed support costs |
20 |
20 |
20 |
a) For each model, calculate contribution margin per unit.
b) For each model, calculate contribution margin per machine-hour.
c) If there is excess capacity, which model is most profitable to produce? Describe why?
d) If there is a machine breakdown, which model is the most profitable to produce? Explain why?
e) How can MD encourage her sales people to promote more profitable model?