23

Assume that a company makes three productsProduct A, Product B, and Product Cand provides the following information with respect to those products:

	Product A					Product B					Product C
Selling price		$	70				$	75				$	85
Variable costs per unit:
Direct materials			16					24					28
Direct labor			40					32					24
Variable overhead			2					3					3
Total variable cost per unit			58					59					55
Contribution margin per unit		$	12				$	16				$	30

The company incurs total fixed costs of $50,000. The maximum demand for each of its products is 600 units. It pays a direct labor wage rate of $16 per hour. The company has only 2,000 direct labor-hours available for production. Assuming the company has made optimal use of its 2,000 direct labor-hours, what is the maximum hourly rate the company should be willing to pay for additional labor-hours of capacity?