tpx value 1.00 points shop. Upholstering is a craft that takes concerning three

Question

tpx value 1.00 points shop. Upholstering is a craft that takes concerning three of the company's upholstered chairs appears below l reproduction furniture. Upholstered furniture is one of its major product lines and the bottieneck on this production line s ime in the uphoistery years of experience to master and the demand for upholstered furniture far exceeds the company's capacity in the upholstering shop S 1.400 800 8 hours cost per unit S 1500 1,000 5 hours Upholstery shop time required to produce one unit S 1,200 10 hours $ Required 1. More time could be made available in the upholstery shop by asking the employees who work in this shop to work overtime sofas, up to how much should the company be willing to pay per hour to keep the upholstery shop open a after normal working hours? at a fixed charge of $45 per hour. The 2. A small nearby upholstering company has offered to upholster furniture tor upholstering company's work is high quality and their craftsmen should be able to work about as quickly as Portsmouth's own craftsmen on the simpler upholstering joos such as the love seat Should management accept this offer? Yes

Explanation / Answer

1) Sofa Selling Price $1,800.00 Less: Variable Cost per unit -$1,200.00 Contribution Margin Per unit (a) $600.00 Time taken to produce one unit(b) 10 Hours Constrained Contribution Margin = A/B $60.00 per hour Maximum amount payable per hour = $60 2) Yes, It is less than the Maximum amount payable per hour within in the company

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