Reference no: EM132640067
Question - Bowflex manufactures three different models of their product, Model R, Model S, and Model T. Considerable market demand exists for all models. The following per unit data apply:
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Model R
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Model S
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Model T
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Selling price
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$100
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$120
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$140
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Direct materials
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$10
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$13
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$14
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Direct labor ($12 per hour)
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$24
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$22
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$48
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Variable support costs ($4 per machine-hour)
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$8
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$16
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$16
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Machine hours per unit
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2
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4
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4
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Variable support costs are machine time at $4 per machine hour.
Required -
a. Which model has the greatest contribution margin per unit?
b. Which model has the greatest contribution margin per machine-hour?
c. If the product mix as packaged and shipped to retailers is typically made up of 2 units of R, 1 unit of S and 3 units of T how many units of each model (round up to whole numbers) will the company need to produce to breakeven if total fixed overhead (which includes fixed support costs) is $2,040,500?
d. If in addition the company wants to make a $1,200,000 after tax profit (the corporate income tax rate is 23%) how many units (using the same sales mix as above) of each model (round up to whole numbers) will the company need to produce?