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calculate which model is most profitable

Norton's Mufflers manufactures three different product lines, Model X, Model Y, and Model Z. Considerable market demand exists for all models. The following 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 costs ($5 per machine hour) 5 10 10
Fixed Costs 20 20 20

If there is a machine breakdown, which model is the most profitable to produce? Why?

How can Norton encourage their sales people to promote the more profitable model?

Solution Preview

Please see the attached Excel spreadsheet.

Model X Model Y Model Z
Selling Price 80 90 100
Direct Materials 30 30 30
Direct Labor 15 15 20
Variable Costs 5 10 10
Fixed Costs 20 20 20
Total Costs 70 75 80
Net Profit Per Unit 10 15 20

If ...

$2.19