Axel Motors produces two types of motors, one for motor vehicles (MEV) and the other for boars (BE2). MEV is constructed on a standard machine, but BE2 must be built using both the standard and a machine used for greater precision, a high-precision machine. The following information is available: Additional information includes the following: a. Axel faces a capacity constraint on the regular machine of 70,000 hours per year. b. The capacity of the high-precision machine is not a constraint. c. Of the $1,200,000 budgeted fixed overbead costs of BE2, $600,000 are lease payments for the high-precision machine. This cost is charged entirely to BE2 because Axel uses the machine exclusively for this product. The company can cancel the lease agreement for the high-precision machine at any time without penalties. d. All other overhead costs are fixed and cannot be changed. TURN OVER Required 1. Calculate the following: a. Contribution margin and net benefit: i. Selling only MEV ( 8 marks) ii. Selling only BE2 iii. What product mix (how many units of MEV and BE2) will maximize Axel's operating income? Show your calculations. 2. A. Axel's standard machine's annual capacity may be increased by 20,000 machine hours at a cost of $300,000. (7 marks) a. Should Axel increase the capacity of the standard machines by 20,000 machinebours? b. How much will this change increase or decrease Axel's operating income? Show your calculations. 3. Suppose that the capacity of the regular machines has bect increased by the 20,000 machinebours to 90,000 machine-bours. Axel has been approached by Clary Corp, to supply 15,000 units of jet-ski motors. IS1, for $300 per unit. Axel must either accept the order for all 15,000 units or reject it totally. JS1 is exactly like MVE except that its variable manufacturing cost is $140 per unit. (It takes 1 hour to produce one unit of V2 on the regular machine, and variable marketing cost equals $30 per unit.) What product mix should Axel choose to maximize operating income? Show your calculations