Evaluate the contribution margin per unit

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Reference no: EM1310950

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?

Reference no: EM1310950

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