Sunday, September 11, 2011

If there is excess capacity, which model is the most profitable to produce?

ACCOUNTING

Multiple Choice

Braun’s Brakes manufactures three different product lines, Model X, Model Y, and Model Z. Considerable market demand exists for all models. The following per unit data apply:



Model X Model Y Model Z

Selling price $50 $60 $70

Direct materials 6 6 6

Direct labor ($12 per hour) 12 12 24

Variable support costs ($4 per machine-hour) 4 8 8

Fixed support costs 10 10 10



If there is excess capacity, which model is the most profitable to produce?

a. Model X

b. Model Y

c. Model Z

d. Both Models X and Y


Click here for the SOLUTION

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