Please answer entirely. Cordova manufactures three types of stained glass window
ID: 2558883 • Letter: P
Question
Please answer entirely.
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 $54.00 18.80 4.00 2.00 Product B $64.00 10.25 4.00 2.50 ProductC $94.00 26.80 4.00 4.00 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 ProductEB 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 A O Product BExplanation / Answer
16.80
Hence, the correct answer is :
The correct answer is :
Product B
This is because the Contribution Margin Per Direct Labor Hour is the highest of Product B.
Since, the bottleneck is the labor hours, hence, the decision is made on the basis of the Contribution Margin Per Direct Labor Hour.
Product A Product B Product C Sales Price 54 64 94 Less : Variable Cost 18.8 10.25 26.8 Contribution Margin 35.2 53.75 67.2 Direct labor Hours Required 2 2.5 4 Contribution Margin Per Direct Labor Hour ( Contribution Margin / Direct Labor Hour) 17.60 21.5016.80