A) Comfy Co. makes three sizes of shirts, Small, Medium, and Large, on one assembly line that has a limit of 600 labor-hours per week. Comfy Co. can sell a maximum of 800 shirts of each size it can make under current operating capacity. Manufacturing information per shirt for each product is as follows:

Small Medium Large

Selling price: $8 $12 $15

Variable costs: $5 $6 $8

Labor-hours per shirt: 0.4 0.5 1.0

(a) How many shirts of each size should be produced and sold to maximize the income

(b) what is the total contribution margin?

B) Madison Co. manufactures a part for its production cycle. The costs per unit for 38,000 units of this part are as follows:

Direct materials $3

Direct labor $5

Variable factory overhead $4

Fixed factory overhead $3

The fixed factory overhead costs are unavoidable. Assuming no other use of their facilities, the highest price that Madison Co. should be willing to pay for the part is:

a. $15 b. $7 c.$8 d. $11 e. $12

C) Video Co. manufactures two products, A and B. The following information was gathered:

A B

Selling price per unit $54.00 $66.00

Variable cost per unit 39.00 54.00

Total fixed costs $25,000

Video Co. manufactures and sells three units of A for every two units of B. If the company sold 1,500 units of A, it would report operating income (loss) of:

a. $22,500 b. $9,500 c. $(25,000) d. $34,500

D) In the short run, the selling price of a good or service must be high enough to cover all costs.

a. True b. False