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Part II: Hendrickson Manufacturing produces three various models of their product as detailed below. The following per unit data apply: Selling price Direct materials Direct
Part II: Hendrickson Manufacturing produces three various models of their product as detailed below. The following per unit data apply: Selling price Direct materials Direct labor ($20 per hour) Variable support costs ($10 per machine-hour) Fixed support costs Model A $190 $ 60 $ 30 $ 20 $ 40 Model B $230 $ 60 $ 30 $ 30 $ 40 Model C $270 $ 60 $ 40 $ 40 $ 40 Respond to each of the following questions: D. For each model, compute the contribution margin per unit and contribution margin per machine- hour and per labor hour. If there is excess capacity, which model is the most profitable to produce? Why? E. If there is a limited machine capacity, which model is the most profitable to produce? If there is a labor shortage, which model is the most profitable to produce? Why? F. How can Hendrickson encourage its sales people to promote the more profitable model? G. Are there qualitative factors that should be considered in (D) and (E) if you do not have capacity to fulfill all your orders that would cause you to produce a less profitable model? Be specific
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