Reference no: EM132612264

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

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

Question i. For each model, compute the contribution margin per unit.

Question ii. For each model, compute the contribution margin per machine-hour.

Question iii. If there is excess capacity, which model is the most profitable to produce? Why?

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

Question v. How can Norton encourage her sales people to promote the more profitable model?