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contribution per unit, machine hours

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1. Maggie'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
Selling Price $80 $90 $100
Direct Materials $30 $30 $30
Direct Labor ($10/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 per unit
b. For each model, compute the contribution 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 Maggie encourage her sales people to promote the more profitable model?

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The contributions per unit for machine hours are given. The excess capacity for which model is the most profitable to produce is given.

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1. Maggie'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
Selling Price $80 $90 $100
Direct Materials $30 $30 $30
Direct Labor ($10/hour) $15 $15 $20
Variable Support Costs ($5 per ...

Solution provided by:
Gaurav Agarwal, MS
Education
  • BE, Bangalore University, India
  • MS, University of Wisconsin-Madison
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