Harley Davidson sells motorcycle X and Y. Motorcycle X sells for $10,000, has va

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 machinery to produce. Harley Davidson has a capacity constraint of 5,000 hours of machinery use per year. 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 machinery use of $2,000. c. Motorcycle X because it has a higher contribution margin per hour of machinery use of $4,000. d. Motorcycle Y because it has a higher contribution margin of $4,000. i chose b

Explanation / Answer

d. Motorcycle Y because it has a higher contribution margin of $4,000.

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