Odysseus Plc makes a variety of products. The company has researched the cost of producing two new products in its factory. The information gathered is as follows:

	Product X			Product Y
	Per 3,000 products			Per 3,000 products
Total Direct materials	6,000	9,000
Total Direct labour	15,000	15,000
Total Variable overheads	3,000	6,000
Total Machine hours	6,000 hours	9,000 hours

The factory incurs total fixed overheads of 150,000 per annum and total machine hours per annum are 75,000 hours.

Market research suggests that customers would be willing to pay 15 per unit of product X and 15 per unit of product Y.

Required:

1. Calculate the marginal cost per unit for each of the two products, X and Y.
2. Calculate the absorption cost per unit for each of the two products, X and Y, using an absorption rate for fixed costs based on total machine hours of the factory.
3. Calculate the contribution and profit/loss per unit for each of the two products, X and Y.
4. Advice Odysseus Plc whether they should produce product X and/or Y. You should justify your recommendation.
5. Do you believe that absorption costing is appropriate for short-term decision making? You should justify your answer.