AA maximum Ltd. manufactures bicycles. Two types of bicycles produced are BWB100 and CSX300. The following data relates to the products. BWB100 CSX300 Selling price
AA maximum Ltd. manufactures bicycles. Two types of bicycles produced are BWB100 and CSX300. The following data relates to the products. BWB100 CSX300 Selling price per unit $280 $380 Direct material $90 $110 Direct labour $120 $180 Variable overhead $10 $19 Variable selling costs $5 $8 Total variable cost/unit $225 $317 Highly skilled staff are required to manufacture the bicycles and this is in short supply, thus considered to be a scarce resource. It takes 2 labour hours to produce one BWB100 and 3 labour hours to produce one CSX300. R_equired: 1. Calculate the contribution margin per unit for BWB100 and CSX300. (2 mark) 2. Which product is more profitable, BWB100 or CSX300, given the limited resource of labour. Show all workings. (3 marks) 3. AA maximum Ltd. only has a maximum of 1000 labour hours per day and the daily demand for BWB100 is 400 units. There is unlimited demand for CSX300. How many units of each type of the bicycle should be produced to maximize the total contribution margin? (4 marks) 4. What is the total contribution margin at the optimal level? (2 marks) lI
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