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Q1) MD Widgets produces three different product lines, Model X, Model Y, and Model Z. Considerable market demand exists for all models. Given below is 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, find out contribution margin per unit.

b) For each model, find out contribution margin per machine-hour.

c) If there is excess capacity, which model is most profitable to produce? Describe why?

d) If there is a machine breakdown, which model is the most profitable to produce? describe why?

e) How can MD encourage her sales people to promote more profitable model?

Accounting Basics, Accounting

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