Modern Toy Company produces two models of toy cars, Top car and Juu car. Important information is given as follows:-

Top car Juu car

Selling price per unit 100 70

Costs per unit:

Direct material costs 28 13

Direct manufacturing labour costs 15 25

Variable manufacturing overhead* 25 12

Fixed manufacturing overhead* 10 5

Marketing costs (all variable) 14 10

Total costs 92 65

Net operating income 8 5

Machine hour per unit of toy car 2 hours 1 hour

* Variable and fixed manufacturing overheads are

allocated on the basis of machine hours

Required:

1. Calculate the contribution per unit per each car model (10 Marks)

2. Calculate the contribution per unit per each car of the constraining resource. (4 Marks)

3. Which product should be produced? Explain your answer. (6 Marks)

(Total marks: 20)