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Problem Two: Constraint, Product Emphasis Smith Motors manufactures three different product lines, Motor A, Motor B, and Motor C. Considerable market demand exists for
Problem Two: Constraint, Product Emphasis Smith Motors manufactures three different product lines, Motor A, Motor B, and Motor C. Considerable market demand exists for all motors. The following per unit data is provided: Selling price Motor A Motor B Motor C $160 $180 $200 Direct materials 60 60 60 Direct labor ($20 per hour) 30 30 40 Variable support costs ($10 per machine-hour) 10 20 20 Fixed support costs 40 40 40 a. For each motor, compute the contribution margin per unit. b. For each motor, compute the contribution margin per machine-hour. c. If there is excess capacity, which motor is the most profitable to produce? Why? d. If there is a machine breakdown, which motor is the most profitable to produce? Why?
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