A company is considering a new product, to be called Model Z.Each Model Z would have a contribution of $2,000.The total Process I assembly capacity would be sufficient to produce 5,000 Model Z per month, and the total Process II capacity would be sufficient to produce 4,000 Model Zs.Model Z would be assembled in the Model X assembly department, each Model Z requiring only half as much time as the Model X. Should the company produce Model Z? How high would the contribution on each Model Z have to be before it became worthwhile to produce the new model?

(Information provided below)

Model X Model Y Production Contribution Model X Model Y Sales for each Model 39000 38000 Contribution 3000 5000 Max Capacity Variable Costs for each/Model Process I 1 2 4000 Direct Materials 24000 20000 Process II 2 2 6000 Direct Labor 4000 4500 Model X Assembly N 0 5000 Variable Overhead / Unit 8000 8500 Model Y Assembly O 3 4500 Contribution of Each Line 3000 5000 Fixed Overhead 8,600,000