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Pan’s Products Inc. manufactures three different product lines, which are called Orange, Blue, and Green. Considerable...

Pan’s Products Inc. manufactures three different product lines, which are called Orange, Blue, and Green. Considerable market demand exists for all models. The following per unit data apply:

                                                                                      Orange       Blue    Green

Selling price                                                                  $180          $195     $220

Direct materials                                                                70              70         70

Direct labor ($20 per hour)                                             30              30         40

Variable support costs ($12 per machine-hour) 12              24         24

Fixed support costs                                                          40              40         40

a.   For each model, compute the contribution margin per unit.

b.   For each model, compute the contribution margin per machine-hour.

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

d.   If there is a machine breakdown, which model is the most profitable to produce? Why?

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