Norton's Mufflers Manufactures Three Different Product Lines,Model X,Model Y and Model

question 208

Essay

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:
$$\begin{array} { l r r r r } & \text { Model X } & \text { Model Y } & \text { Model Z } \\ & \$ 80 & \$ 90 & \$ 100 \\\text { Direct materials } & 30 & 30 & 30 \\\text { Direct labour } ( \$ 10 \text { per hour } ) & 15 & 15 & 20 \\\text { Variable support costs } ( \$ 5 \text { per machine-hour } ) & 5 & 10 & 10 \\\text { Fixed support costs } & 20 & 20 & 20\end{array}$$
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 Norton encourage her sales people to promote the more profitable model?
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Definitions:

Cost Of Goods Manufactured

The cumulative expenses a business incurs to manufacture products during a particular timeframe, encompassing materials, workforce, and indirect costs.

Direct Labour

The workforce directly involved in the production of goods or the provision of services.

Cost Of Goods Sold

Expenses directly related to the production of a company’s merchandise for sale, including the cost of labor and materials.

Raw Materials

The basic material from which a product is made, typically used in the manufacturing or production process.