Contribution margin per unit & machine-hour.
MD Widgets manufactures three different product lines, Model X, Model Y, and Model Z. Considerable market demand exists for all models. The following 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, compute the contribution margin per unit.
b) For each model, compute the contribution margin per machine-hour.
c)If there is excess capacity, which model is the most profitable to produce? Why?
d) If there is a machine breakdown, which model is the most profitable to produce? Why?
e)How can MD encourage her sales people to promote the more profitable model?