Cordova manufactures three types of stained glass window, cleverly named Product

Question

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 $41.00 20.00 9.00 1.50 Product B $51.00 13.50 9.00 2.50 Product C $81.00 34.50 9.00 3.00 Cordova currently is limited to 45,000 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 ProductA 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? Productc O Product B ProductA

Explanation / Answer

Product C should be produced as it has highest contribution margin per hour.

Product A Product B Product C Sales Price $41 $51 $81 Less: Variable cost 20 13.50 34.50 Contribution margin per unit $21 $37.50 $46.50 Labor hours per unit 1.50 2.50 3.00 Contribution margin per DL Hour $14 $15 $15.50

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