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Norton's Mufflers Manufactures Three Different Product Lines,Model X,Model Y and Model

Question 148

Essay

Norton's Mufflers 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 $80$90$100 Direct materials 303030 Direct labour ($10 per hour )151520 Variable support costs ($5 per machine-hour )51010 Fixed support costs 202020\begin{array} { l r r r r } & \text { Model X } & \text { Model Y } & \text { Model Z } \\ & \$ 80 & \$ 90 & \$ 100 \\\text { Direct materials } & 30 & 30 & 30 \\\text { Direct labour } ( \$ 10 \text { per hour } ) & 15 & 15 & 20 \\\text { Variable support costs } ( \$ 5 \text { per machine-hour } ) & 5 & 10 & 10 \\\text { Fixed support costs } & 20 & 20 & 20\end{array}
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 Norton encourage her sales people to promote the more profitable model?
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a.The contribution margin per unit is:
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