Cordova manufactures three types of stained glass windows , cleverly named Produ
ID: 2450870 • Letter: C
Question
Cordova manufactures three types of stained glass windows , cleverly named Products A, B, and C. Information about these products are below.
Cordova currently is limited to 60,000 labor hours per momth.
Required
1. Assuming an infinite demand for each of Cordova's products, compute the number of unirts of each product the company should produce. Justify your answer
Product A Product B Product C Sales price $ 35 $45 $75 Variable cost per unit 17 21 32 Fixed cost per unit 5 5 5 Required number of labor hours 1.25 2.00 2.50Explanation / Answer
Step 1: To identify ranking for each product based on highest contribution per labour hr:
From the given Information:
Particulars Product A Product B Product C
Sales price $35 $45 $75
less: Variable cost per unit 17 21 32
Contibution per unit 18 24 43
Contribution per labour hr 14.4(18/1.25) 12 (24/2) 17.2(43/2.50)
Ranking II III I
From the above statement,Product C has to be given first priority to the full potential of Available labour hrs, since no restriction to the sales demand.
Therefore, number of units to be produced = 60,000 labur hrs/ 2.50 hr per unit = 24000 units of C
Product A and Product B production cannot be made, since no labour hrs available, when C is produced.
So, number of units of each product, A= 0
B= 0 and C = 24000 for higher profitability.