CyclePath Company produces two different products that have the following price and cost characteristics.

Management believes that pushing sales of the Bicycle product would maximize company profits because of the high contribution margin per unit for this product. However, only 50,000 labor hours are available each year, and the Bicycle product requires 4 labor hours per unit while the Tricycle model requires 2 labor hours per unit. The company sells everything it produces.

Required:

1. Calculate the contribution margin per unit of constrained resources for each model.
2. Which model would CyclePath prefer to sell to maximize overall company profit? Explain.

\begin{tabular}{lcc} & Bicycle & Tricycle \\ \hline Selling price per unit & $200 & $100 \\ Variable cost per unit & $120 & $50 \end{tabular}