Solution - 1:
Selling price of sofa = $2,010
Variable cost per unit of Sofa = $1,350
Contribution per unit of Sofa = $2,010 - $1,350 = $660
Time required to produce one unit of Sofa = 11 hours
Contribution per hour of Sofa = 660/11 = $60/Hour
If upholstery shops keep open after normal working hours, we can pay maximum overtime premium of $60 per hour that will result in no profit no loss.
Solution – 2:
Selling price per unit of love seat = $1,550
Variable cost per unit of love seat = $1,150
Contribution per unit of love seat = $1,550 - $1,150 = $400
Time required to produce one unit of love seat = 5 hours
Contribution per hour of love seat = 400/5 = $80/Hour
If job will be given to upholstering company then charges payable = $55/hour
Additional contribution margin per hour if we hire upholstering company to upholster the love seat = $80 - $55 = $25/Hour
Solution – 3:
As Portsmouth is earning additional contribution of $25/hour by hiring nearby company; therefore it should hire nearby upholster company.
Exercise 12-6 Managing a Constrained Resource (LO12-6] Portsmouth Company makes upholstered furniture. Its only variable cost...
Exercise 12-6 Managing a Constrained Resource (L012-6] Portsmouth Company makes upholstered furniture. Its only variable cost is direct materials. The demand for the company's products far exceeds its manufacturing capacity. The bottleneck (or constraint) in the production process is upholstery labor-hours. Information concerning three of Portsmouth's upholstered chairs appears below: Selling price per unit Variable cost per unit Upholstery labor-hours per unit $ $ Recliner 1,284 $ 900 $ 6 hours Sofa Love Seat 1,700 $ 1,520 1,200 $ 1,100...
Exercise 11-6 Managing a Constrained Resource (LO11-6] Portsmouth Company makes upholstered furniture. Its only variable cost is direct materials. The demand for the company's products far exceeds its manufacturing capacity. The bottleneck (or constraint) in the production process is upholstery labor-hours. Information concerning three of Portsmouth's upholstered chairs appears below: Selling price per unit Variable cost per unit Upholstery labor-hours per unit $ $ Recliner 1,264 $ 800 $ 8 hours Sofa Love Seat 2,000 $ 1,650 1,300 $ 1,200...
Exercise 11-6 Managing a Constrained Resource (LO11-6] Portsmouth Company makes upholstered furniture. Its only variable cost is direct materials. The demand for the company's products far exceeds its manufacturing capacity. The bottleneck (or constraint) in the production process is upholstery labor-hours. Information concerning three of Portsmouth's upholstered chairs appears below: Selling price per unit Variable cost per unit Upholstery labor-hours per unit Recliner Sofa Love Seat $ 1,190 $ 1,880 $ 1,550 $ 700 $ 1,250 $ 1,100 7 hours...
Exercise 11-6 Managing a Constrained Resource (LO11-6) Portsmouth Company makes upholstered furniture. Its only variable cost is direct materials. The demand for the company's products far exceeds its manufacturing capacity. The bottleneck (or constraint) in the production process is upholstery labor-hours. Information concerning three of Portsmouth's upholstered chairs appears below: Selling price per unit Variable cost per unit Upholstery labor-hours per unit Recliner Sofa Love Seat $ 1,298 $ 1,855 $ 1,280 850 $ 1,250 $ 1.000 7 hours 11...
Portsmouth Company makes upholstered furniture. Its only variable cost is direct materials. The demand for the company's products far exceeds its manufacturing capacity. The bottleneck (or constraint) in the production process is upholstery labor-hours. Information concerning three of Portsmouth's upholstered chairs appears below: Recliner $ 1,228 Sofa 1,800 Love Seat $ 1,370 $ Selling price per unit Variable cost per unit 8 hours 10 hours 4 hours 1. Portsmouth is considering paying its upholstery laborers hourly compensation, in addition to...
Portsmouth Company... Portsmouth Company makes upholstered furniture. Its only variable cost is direct materials. The demand for the company's products far exceeds its manufacturing capacity. The bottleneck (or constraint) in the production process is upholstery labor-hours. Information concerning three of Portsmouth's upholstered chairs appears below: points Selling price per unit Variable cost per unit Upholstery labor-hours per unit Recliner Sofa Love Seat $ 1,156 $ 1,850 $ 1,300 $ 750 $ 1,250 $ 1,000 7 hours 12 hours 4 hours...
Portsmouth Company makes upholstered furniture Its only variable cost is direct materials. The demand for the company's products far exceeds its manufacturing capacity. The bottleneck (or constraint) in the production process is upholstery labor-hours. Information concerning three of Portsmouth's upholstered chairs appears below Selling price per unit Variable cost per unit Upholstery labor hours per unit $ $ Recliner 1,480 $ 800 $ 8 hours Sofa Love Seat 1,800 $ 1,500 1,200 $ 1,000 10 hours 5 hours Required: 1....
Portsmouth Company makes upholstered furniture. Its only variable cost is direct materials. The demand for the company's products far exceeds its manufacturing capacity. The bottleneck (or constraint) in the production process is upholstery labor-hours. Information concerning three of Portsmouth's upholstered chairs appears below: Selling price per unit Variable cost per unit Upholstery labor-hours per unit Recliner Sofa $ 1,000 $ 1,900 $ 700 $ 1,250 6 hours 13 hours Love Seat $ 1,500 $ 1,200 4 hours Required: 1. Portsmouth...
Should Portsmouth hire the nearby upholstering company? Portsmouth Company makes upholstered furniture. Its only variable cost is direct materials. The demand for the company's products far exceeds its manufacturing capacity. The bottleneck (or constraint) in the production process is upholstery labor-hours. Information concerning three of Portsmouth's upholstered chairs appears below: Selling price per unit Variable cost per unit Upholstery labor-hours per unit Recliner Sofa Love Seat $ 1,214 $ 2,065 $ 1,440 $ 750 $ 1,350 $ 1,100 8 hours...
Portsmouth Company makes upholstered furniture. Its only variable cost is direct materials. The demand for the company's products far exceeds its manufacturing capacity. The bottleneck (or constraint) in the production process is upholstery labor-hours. Information concerning three of Portsmouth's upholstered chairs appears below: Selling price per unit Variable cost per unit Upholstery labor-hours per unit Love Recliner Sofa Seat $ 1,276 $ 1,700 $ 1,275 $ 800 $ 1,250 $ 850 10 7 hours 5 hours hours on Required: 1....