20 . Kawasaki sells motorcycles Ninja Z X -6R and Ninja ZX-14R . The Ninja ZX-6R
ID: 2634750 • Letter: 2
Question
20.
Kawasaki sells motorcycles Ninja ZX-6R and Ninja ZX-14R. The Ninja ZX-6R sells for $10,000, has variable cost (labor and material) of $2,000, and requires 10 hours of use of machinery to produce. The Ninja ZX-14R sells for $12,000, has variable costs (labor and material) of $8,000, and requires 2 hours of use of machinery to produce. Kawasaki has excess capacity of 5,000 hours of use of machinery. Which motorcycle should it produce?
A)
The Ninja ZX-6R because it has a higher contribution margin of $8,000.
B)
The Ninja ZX-14R because it has a higher contribution margin per hour of machinery use of $2,000.
C)
The Ninja ZX-6R because it has a higher contribution margin per hour of machinery use of $4,000.
D)
The Ninja ZX-14R because it has a higher contribution margin of $4,000.
20.
Kawasaki sells motorcycles Ninja ZX-6R and Ninja ZX-14R. The Ninja ZX-6R sells for $10,000, has variable cost (labor and material) of $2,000, and requires 10 hours of use of machinery to produce. The Ninja ZX-14R sells for $12,000, has variable costs (labor and material) of $8,000, and requires 2 hours of use of machinery to produce. Kawasaki has excess capacity of 5,000 hours of use of machinery. Which motorcycle should it produce?
A)
The Ninja ZX-6R because it has a higher contribution margin of $8,000.
B)
The Ninja ZX-14R because it has a higher contribution margin per hour of machinery use of $2,000.
C)
The Ninja ZX-6R because it has a higher contribution margin per hour of machinery use of $4,000.
D)
The Ninja ZX-14R because it has a higher contribution margin of $4,000.
Explanation / Answer
Total Machine time = 5,000 hours
For kawaski Ninja ZX-6R,
Selling price=$10,000
Cost Price=$2,000
Machine Time = 10hours
Profit per bike = $8,000
So total profit per hour = $8,000/10 = $800
For Kawasaki ZX-14R,
Selling price=$12,000
Cost Price=$8,000
Machine Time = 2hours
Profit per bike = $4,000
Profit per hour = $4,000/2 =$2,000
Hence Producing Kawasaki ZX-14R is more profitable
Option (B)
B)
The Ninja ZX-14R because it has a higher contribution margin per hour of machinery use of $2,000.
B)
The Ninja ZX-14R because it has a higher contribution margin per hour of machinery use of $2,000.
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