Sensitivity of Cost Data: Tower Company produces two types of gloves. Gl and G2. The cost and production data concerning these two products are as follows:

Total production time available is 2,500 hours per month. Since production time is limited and gross margin per unit for Gl is higher than for G2, Tower Company management decided to produce and sell Gl exclusively.

Required: Did Tower Company management make the correct decision?

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G1 G2 Selling price Manufacturing costs: Materials Labor Fixed Overhead $12.00 $14.00 4.00 1.50 3.00 6.00 2.50 5.00 Gross margin per unit $ 2.50 $ 1.50 Required production time/unit 2 hours 2 hours