Short Problem 3: Brown Home produces and sells specialty mattresses. Production is a machine-intensive process. Brown's variable costs are direct material costs, variable machining costs, and sales commissions. May Brown, the owner, is planning production for the coming year and collects the following data: Estimated Demand (units) Charlie Bella 1,800 4,500 Luna 39,000 Direct Material Var. Machining Selling Price cost per unit cost per unit $3,000 $750 $600 $2,100 $500 $500 $800 $100 $200 1). Salespeople are paid a 5% commission on each Charlie or Bella sold, and a 10% commission on each Luna sold. Commissions are based on selling prices. All other marketing and administrative costs are fixed and, along with the fixed manufacturing costs, total $8,750,000. 2). Annual capacity is 50,000 machine-hours, which is limited by the availability of machine. Variable machining costs are $200 per hour. 3). Brown Home holds negligible inventories to minimize business risk. Required: a. Calculate the machine-hours required to satisfy the estimated demand for each type of mattress. b. What is the contribution margin per unit earned from each type of mattress? c. Advise May Brown about the most profitable production levels of the three products. (d. Suppose Brown Home can lease additional machining capacity on an as-needed basis. What is the maximum amount that May Brown would be willing to pay for each hour of additional machining capacity in the coming year? $398 Bella's (Mper MH 50,006-38 000-57