Question
Bright Furniture Company produces basic and luxury office chairs. The basic chair is sold at $50 each, and the luxury chair is sold at $120
Bright Furniture Company produces basic and luxury office chairs. The basic chair is sold at $50 each, and the luxury chair is sold at $120 each. The variable cost of making the basic chair is $30 each. It costs an extra $20 to make the luxury chair. It takes 30 labor hours to produce 100 basic chairs and 45 labor hours to produce 100 luxury chairs. There are 6,500 hours of labor time available for production each week. The maximum weekly sales for the basic and luxury chairs are 1,500 and 500 units, respectively. Fixed production costs total $1,000,000 per year. All selling costs are fixed.
Required: (a) Determine the optimal production level in number of units for each product. (b) Prepare a trial balance for the company based on the optimal production level. (c) Calculate the contribution margin for each type of chair.
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