E7-11 Making Decisions Involving Constrained Resource [LO 7-2, 7-7]

Cordova manufactures three types of stained glass window, cleverly named Products A, B, and C. Information about these products follows:

Product A

Product B

Product C

Sales price

$

40.00

$

50.00

$

80.00

Variable costs per unit

21.50

21.00

41.50

Fixed costs per unit

8.00

8.00

8.00

Required number of labor hours

1.25

2.00

2.50

Cordova currently is limited to 45,000 labor hours per month. Required: Assuming an infinite demand for each of Cordovas products, determine contribution margin per direct labor hour. (Round your answers to 2 decimal place.)

	Contribution Margin
Product A		CM per DL Hour
Product B		CM per DL Hour
Product C		CM per DL Hour

Which product would be Cordova's first choice to produce?

	Product C
	Product B
	Product A