value D. 5.14 points Portsmouth Company makes fine colonial reproduction furnitu
ID: 2579496 • Letter: V
Question
value D. 5.14 points Portsmouth Company makes fine colonial reproduction furniture. Upholstered furniture is one of its major product lines and the bottleneck on this production line is time in the upholstery shop. Upholstering is a craft that takes years of experience to master and the demand for upholstered furniture far exceeds the company's capacity in the upholstering shop. Information concerning three of the company's upholstered chairs appears below Sofa $ 1.860 $ 1,200 Love Seat $1,320 $ 1.000 4 hours Recliner Selling price per unit Variable cost per unit Upholstery shop time required to produce one unit $ 1,208 $ 800 6 hours 11 hours 1. More time could be made available in the upholstery shop by asking the employees who work in this shop to work overtime. Assuming that this extra time would be used to produce sofas, up to how muchh of a premium should the company be willing to pay per hour to keep the upholstery shop open after normal working hours? aximum amount payable per hour 2. A small nearby upholstering company has offered to upholster furniture for Portsmouth at a fixed charge of $56 per hour. The management of Portsmouth is confident that this 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 jobs such as the love seat Should management accept this offer? O Yes No 0 Type here to searchExplanation / Answer
statment of contributuon per hourof upholstery shop time
in case extra time will be used to produce sofa , then maximum amount payable would be 60 per hr.
2. yes management should accept the offer because cost is less than the contributuon of all three
recliner sofa love seat sale price 1208 1860 1320 variable cost 800 1200 1000 contribution 408 660 320 Upholstery shop time required to produce 1 unit 6hr 11 hr 4 hr contribution per Hour 68 60 80Related Questions
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