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What is the contribution margin provided by each product

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Reference no: EM132502745

Cost Profit Volume Analysis

Assume that Snowmobile Company produces two products: Racer and Cruiser. Below are the data for each:
                                                Racer                                           Cruiser
Selling price                      $6,000                                  $4,000
Variable cost                       3,600                                      2,650

In the past, Snowmobiles had difficulty finding skilled workers. However, the company recently hired additional labor, thereby eliminating this resource constraint. The company now is faced with limited available machine-hours. It has a total of 4,000 machine- hours available each month. The Racer requires 50 machine-hours per unit and the Cruiser requires 15 machine-hours per unit.

Question (1) What is the contribution margin provided by each product?

Question (2) Calculate the contribution margin per unit of constrained resource for each model.

Question (3) Which model would the company prefer to sell to maximize overall company profit?

Reference no: EM132502745

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