8 value 2.00 points E7-11 Making Decisions Involving Constrained Resource [LO 7-

Question

8 value 2.00 points E7-11 Making Decisions Involving Constrained Resource [LO 7-2, 7-7] Cordova manufactures three types of stained glass window, cleverly named Products A, B, and C. Information about these products follows Sales price Variable costs per unit Fixed costs per unit Required number of labor hours Product A $47.00 22.70 9.00 1.50 Product B $57.00 12.00 9.00 2.50 Product C $87.00 38.70 9.00 3.00 Cordova currently is limited to 60,000 labor hours per month Required Assuming an infinite demand for each of Cordova's products, determine contribution margin per direct labor hour. (Round your answers to 2 decimal place.) Contribution Margin Product A Product B Product C CM per DL Hour CM per DL Hour CM per DL Hour Which product would be Cordova's first choice to produce? Product B Product C Product A

Explanation / Answer

Calculate contribution margin per labour hour :

a) Product B would be cordova's first choice

Product A Product B Product C Sale price per unit 47 57 87 Variable cost per unit 22.70 12 38.70 Contribution margin per unit 24.30 45 48.30 Labour hour per unit 1.50 2.50 3.00 Contribution margin per labour hour 16.20 18 16.10

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