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Harley Davidson sells motorcycle X and Y. Motorcycle X sells for $10,000, has variable cost (labor and material) of $2,000, and requires 10 hours of use of machinery to produce. Motorcycle Y sells for $12,000, has variable costs (labor and material) of $8,000, and requires 2 hours of use of machinery to produce. Harley Davidson has excess capacity of 5,000 hours of use of machinery.

Which motorcycle should it produce?

a. Motorcycle X because it has a higher contribution margin of $8,000.

b. Motorcycle Y because it has a higher contribution margin per hour of $2,000.

c. Motorcycle X because it has a higher contribution margin per hour of $4,000.

d. Motorcycle Y because it has a higher contribution margin of $4,000

 

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