Solution - 1-1:
Selling price of sofa = $1,700
Variable cost per unit of Sofa = $1,300
Contribution per unit of Sofa = $1,700 - $1,300 = $400
Time required to produce one unit of Sofa = 10 hours
Contribution per hour of Sofa = 400/10 = $40/Hour
If upholstery shops keep open after normal working hours, we can pay maximum overtime premium of $40 per hour that will result in no profit no loss.
Solution – 1-2:
Selling price per unit of love seat = $1,400
Variable cost per unit of love seat = $1,100
Contribution per unit of love seat = $1,400 - $1,100 = $300
Time required to produce one unit of love seat = 4 hours
Contribution per hour of love seat = 300/4 = $75/Hour
If job will be given to upholstering company then charges payable = $35/hour
Additional contribution margin per hour if we hire upholstering company to upholster the love seat = $75 - $35 = $40/Hour
Solution – 1-3:
As Portsmouth is earning additional contribution of $40/hour by hiring nearby company; therefore it should hire nearby upholster company.
Solution 2-1:
Solution 2-1: | |||
Financial advantage (disadvantage) to determine which product to be sold at split off and which is to be further processed - Dorsey Company | |||
Particulars | Product A | Product B | Product C |
Selling price after further processing | $30.60 | $25.60 | $39.60 |
Selling price at split off point | $25.00 | $19.00 | $31.00 |
Increment revenue per pound or gallon | $5.60 | $6.60 | $8.60 |
Total quarterly output in pound or gallon | 14000 | 21800 | 5200 |
Total Incremental Revenue | $78,400.00 | $143,880.00 | $44,720.00 |
Total incremental processing cost | $83,800.00 | $121,080.00 | $55,280.00 |
Financial advantage (disadvantage) of further processing | -$5,400.00 | $22,800.00 | -$10,560.00 |
Solution 2-2: | |||
Particulars | Product A | Product B | Product C |
Sell at split off Point? | Yes | No | Yes |
Process Further? | No | Yes | No |
Portsmouth Company makes upholstered furniture. Its only variable cost is direct materials. The demand for the...
1.) 2.) 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 constriant) in the production process is upholstery labor-hours. Information concerning three of Portsmouth's upholstered chairs appears below Reclinerll SotaLove Seat/ Selling price per unit Variable cost per unit Upholstery labor-hours per unit 1,262$1,865 380 900 7 hours 13 hours 6 hours 800 1,150 Required 1. Portsmouth is considering paying its upholstery laborers...
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 Sofa Love Seat $ 1,346 $ 1,800 $ 1,525 $ 850 $ 1,200 $ 1,100 8 hours 10 hours 5 hours Required: 1. Portsmouth...
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 1,178 800 7 hours $ $ Sofa 1,810 1,150 12 hours Love Seat $ 1,630 $ 1,150 6 hours Required: 1. Portsmouth...
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 $ 1,340 $ 1,685 $ 1,340 $ 850 $ 1,100 $ 1,000 7 hours 13 hours 4 hours Required: 1. Portsmouth...
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 $ 1,134 $ 700 7 hours $ $ Sofa 1,740 1,200 12 hours Love Seat $ 1,575 $ 1,150 5 hours Required: 1. Portsmouth...
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 Love Recliner Sofa Seat $ 1,276 $ 1,700 $ 1,275 $ 800 $ 1,250 $ 850 10 7 hours 5 hours hours on 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...