a) Taylor Furniture produces and sells specialty mattresses. Production is a machine-intensive process. Taylor's variable costs are direct material costs, variable machining costs, and sales commissions. Marion Taylor, the owner, is planning production for the coming year and collects the following data: Selling Price Estimated Demand (in Units) 1.800 4,500 40,000 Direct Material Cost Per Unit $ 750 500 100 Variable Machining Cost per Unit $ 600 500 200 Nealy Tersa Pelta $ 3,000 2.100 800 Salespeople are paid a 5% commission on each Nealy or Tersa sold, and a 10% commission on each Pelta sold. All other marketing and administrative costs are fixed and, along with the fixed manufacturing costs, total $8.750,000. Annual capacity is 52,000 machine-hours, which is limited by the availability of machines. Variable machining costs are $200 per hour. Taylor Furniture holds negligible inventories to minimize business risk. 1. Calculate the machine-hours required to satisfy the estimated demand for each type of mattress. (3) 2. What is the contribution margin per unit earned from each type of mattress? (3) 3. Advise Marion Taylor about the most profitable production levels of the three products. (4) 4. Suppose Taylor Furniture can lease additional machining capacity on an as-needed basis. What is the maximum amount that Marion Taylor would be willing to pay for each hour of additional machining capacity in the coming year? (3) a) Based on demand, Pitfall Company has been concluded that the sales mix will be 40% chocolate chip, 25% peanut butter and 35% sugar cookies to hit the 100% production capacity. Each cookie has different variable costs: Types of Cookies Variable Cost Selling Price Chocolate Chip $2.75 $7.00 Peanut Butter $2.25 $5.50 Sugar Cookies $2.00 $4.50 Determine the number of units Pitfall will have to sell to break even? Assume fixed cost will be $40,650. (7)