1. (20 points).Yamaha Inc. makesandsells three models ofjet boats: Fishing, Wake and Luxury. Relevant annual production and sales information, on a per unit basis, is provided in the following table:

Per Unit Financial Information	Fishing	Wake	Luxury
Selling price	$30,000	$50,000	$70,000
Production Costs:
Direct materials	$10,300	$16,000	$25,000
Direct Labor ($20 per hour)	$2,000	$3,000	$6,000
Variable Overhead	$1,500	$2,250	$4,500
Fixed Overhead, allocation per unit	$6,000	$16,000	$16,000
SG&A Costs:
Variable SG&A	$1,200	$1,550	$1,800
Fixed SG&A, allocation per unit	$1,000	$1,000	$1,000

Variable overhead is applied based on DLH's. Fixed overhead is applied based on machine hours, at a rate of $100 per MH. Explain and support your answers.

Assume that Yamaha faces huge demand for each model - well over production capacity.

a. Which model Yamaha should emphasize, if it faces limited amount of skilled labor?

b. Which model Yamaha should emphasize, if it faces limited amount of machine hours?

Assume now that Yamaha faces the following annual demand for each model, and that skill labor is unlimited but machine hours capacity is limited at 36,000 MHs per year.

	Fishing	Wake	Luxury
Demand - quantity	400	150	200

c. What should be the production allocation? (That is, how many boats of each model should Yamaha produce?)

d. What is the maximum total contribution margin that can be obtain with 36,000 MHs (and the above limited demand)?

e. Caterpillar offered Yamaha an annual upgrade service. The upgrade would double the annual MH capacity to 72,000 MHs. What is the maximum amount that Yamaha would be willing to pay for the annual upgrade service?