What is the correct numbers for: Less: Variable Cost (it is neither 0 or 9 for e

Question

What is the correct numbers for: Less: Variable Cost (it is neither 0 or 9 for either box):

Service Emphasis The following analysis of selected data is for each of the two services Gates Corporation provides. Service A Service B Per-service data at 10,000 services Sales price Service costs: Variable $26 $22 Selling and administrative expenses: Variable In the Gates operation, labor capacity is the company's constraining resource. Each unit of A requires 3 hours of labor, and each unit of B requires 2 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 Gates might have. Service Revenue Less: Variable cost Contribution margin 12 10 Labor hours per unit Contribution margin per labor hour

Explanation / Answer

Ans. A B

Variable cost. 14 12

*Calculation:

Variable cost = service variable cost + variable selling & administration expenses

A. 9 + 5 = 14

B. 9 + 3 = 12

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