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

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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