Question

Springer Products 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: Model X $50 Model Y $63 Model Z $72 Selling price Direct materials Direct labor ($13 per hour) Variable support costs ($4 per machine - hour) Fixed support costs ūcco ü co co co Which model has the greatest contribution margin per machine - hour? O A. Model X O B. Model Y O C. Model Z OD. Both Model X and Model Y have the highest and same contribution margin per machine -hour

Answer 1

Contribution margin for each Model & Contribution margin per machine hour :- Particulars Model X Model Y Model Z Selling price 50.00 63.00 72.00 Less: Variable costs Direct materials 8.00 8.00 8.00 Direct labor 13.00 13.00 26.00 Variable support costs 4.00 8.00 8.00 Total Variable costs 25.00 29.00 42.00 Contribution margin for each Model 25.00 34.00 30.00 No of machine hours required for each model unit (Variable support cost of each model/S 4 1 per machine hour) Contribution margin per machine hour 25.00 17.00 15.00 Since contribution margin per machine hour of Model X is greater than Model Y and Model Z, Model X has greatest contribution margin per machine hour. Answer is Model X