1. Limited Resources Assume Fender produces only three guitars: the Stratocaster, Dreadnought and Telecaster. A limitation of 720 labor hours per week prevents Fender from meeting the sales demand for these products. Product information is as follows: Stratocaster Dreadnought Telecaster Unit selling price $864 $540 $1,134 Unit variable costs (540) (270) (972) Unit contribution margin $324 $270 $162 Labor hours per unit 36 36 24 Required Determine the weekly contribution from each product when total labor hours are allocated to the product with the highest. 1. Unit selling price. 2. Unit contribution margin. 3. Contribution per labor hour. (Hint: Each situation is independent of the others.) Highest Highest Highest Unit Contribution Contribution Selling Price per Labor Hour Telecaster Statocaster Dreadnought Labor hours available 720 720 720 Labor hours per unit 36 36 36 x Weekly production 20 20 30 Unit contribution margin $ 324 x $ 270 X $ 162 X Weekly contribution $ 6,480 x $ 5,400 x $ 4,860 x per Unit Determine the opportunity cost the company will incur if management requires the weekly production of 20 Telecasters. Hint: You want to maximize short-run profit. Think about which guitar is most profitable. $ 1,620 X