Service Emphasis The following analysis of selected data is for each of the two

Question

Service Emphasis
The following analysis of selected data is for each of the two services Rockville Corporation provides.

In the Rockville's operation, labor capacity is the company's constraining resource. Each unit of G requires 3 hours of labor, and each unit of H requires 1 hours of labor. Assuming that all services can be sold at a normal price, prepare an analysis showing which of the two services should be provided with any unused productive capacity that Rockville might have.

Any unused capacity should be devoted to Service H, which has $2 less contribution margin per labor hour than does Service G.

Any unused capacity should be devoted to Service G, which has $2 more contribution margin per labor hour than does Service H.

Any unused capacity should be devoted to Service H, which has $2 more contribution margin per labor hour than does Service G.

Service G Service H Per-unit data at 10,000 services Sales price $28 $15 Service costs: Variable 11 7 Fixed 6 4 Selling and administrative expenses: Variable 5 2 Fixed 3 1 QUESTION 5 Not complete Points out of 2.00 P Flag question Service Emphasis The following analysis of selected data is for each of the two services Rockville Corporation provides. Service G Service H Per-unit data at 10,000 services Sales price Service costs: $28 $15 Variable E Fixed o AN Selling and administrative expenses: Variable un Fixed w In the Rockville's operation, labor capacity is the company's constraining resource. Each unit of Grequires 3 hours of labor, and each unit of H requires 1 hours of labor. Assuming that all services can be sold at a normal price, prepare an analysis showing which of the two services should be provided with any unused productive capacity that Rockville might have. Service Revenue Less: Variable cost Contribution margin Labor hours per unit Contribution margin per labor hour $ O Any unused capacity should be devoted to Service H, which has $2 less contribution margin per labor hour than does Service G. OAny unused capacity should be devoted to Service G, which has $2 more contribution margin per labor hour than does Service H. O Any unused capacity should be devoted to Service H, which has $2 more contribution margin per labor hour than does Service G.

Explanation / Answer

Calculate contribution margin per labour hour :

So answer is c) Any unused capacity should be devoted to service , Which has $2 more contribution margin per labour hour than does service G.

G H Revenue 28 15 Less: Variable cost 16 9 Contribution margin 12 6 Labour hour per unit 3 1 Contribution margin per labour hour 4 6

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