Please help me solve for maximum amount payable per hour! Thank you! Portsmouth
ID: 2444480 • Letter: P
Question
Please help me solve for maximum amount payable per hour! Thank you!
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: Upholstery shop time required to produce one unit 8 hours 13 hours 5 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 Assuming that this extra time would be used to produce sofas, up to how much of a premium should the company be willing to pay per hour to keep the upholstery shop open after normal working hours?Explanation / Answer
Calculation of Contribution Per Upholstery Shop time Hour:
So, $45 is the maximum amount of premium that can be paid.
Recliner Sofa Love Seat Selling Price 1,248 1,985 1,525 Less: Variable Cost 800 1400 1100 Contribution 448 585 425 Hours required 8 13 5 Contribution Per Hour 56 45 85