Question:
Harley Davidson sells motorcycle X and Y. Motorcycle X sells for $10,000, has variable cost (labor and material) of $2,000, and requires 10 hours of use of machinery to produce. Motorcycle Y sells for $12,000, has variable costs (labor and material) of $8,000, and requires 2 hours of use of machinery to produce. Harley Davidson has excess capacity of 5,000 hours of use of machinery.
Which motorcycle should it produce?
a. Motorcycle X because it has a higher contribution margin of $8,000.
b. Motorcycle Y because it has a higher contribution margin per hour of $2,000.
c. Motorcycle X because it has a higher contribution margin per hour of $4,000.
d. Motorcycle Y because it has a higher contribution margin of $4,000.