Exercise 11-6 Managing a Constrained Resource (LO11-6] Portsmouth Company makes upholstered furniture. Its only variable cost is direct materials. The demand for the company's products far exceeds its manufacturing capacity. The bottleneck (or constraint) in the production process is upholstery labor-hours. Information concerning three of Portsmouth's upholstered chairs appears below sofa Selling price per unit Variable cost per unit Upholstery labor-hours per unit Recliner $ 1,328 $ $ 800 $ 8 hours Love Seat 1,650 $ 1,330 1,150 $ 1, ose 10 hours 4 hours Required: 1. Portsmouth is considering paying its upholstery laborers hourly compensation, in addition to their usual salaries, to work overtime. Assuming that this extra time would be used to produce sofas, up to how much of an overtime premium per hour should the company be willing to pay to keep the upholstery shop open after normal working hours? 2. A small nearby upholstering company has offered to upholster furniture for Portsmouth at a price of $47 per hour. The management ith is confident that this upholstering company's work is high quality and their craftsmen can work as quickly as Portsmouth's own craftsmen on the simpler upholstering jobs such as the Love Seat How much additional contribution margin per hour can Portsmouth earn if it hires the nearby upholstering company to make Love Seats? 3. Should Portsmouth hire the nearby upholstering company? of Portsm Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required Portsmouth is considering paying its upholstery taborers hourly compensation. In addition to their usual salaries, to work overtime. Assuming that this extra time would be used to produce sofas, up to how much of an overtime premium per hour should the company be willing to pay to keep the upholstery shop open after normal working hours? Maximum ovime premium pet bour Required 2 > Portsmouth Company makes upholstered furniture. Its only variable cost is direct materials. The demand for the company's products far exceeds its manufacturing capacity. The bottleneck (or constraints in the production process is upholstery labor-hours. Information concerning three of Portsmouth's upholstered chairs appears below: Selling price per unit Variable cost per unit Upholstery labor-hours per unit Recliner 1,3285 800 $ 8 hours Sofa Love Seat 1,6505 1,330 1,150 $ 1,050 10 hours 4 hours Required: 1. Portsmouth is considering paying its upholstery laborers hourly compensation, in addition to their usual salaries, to work overtime. Assuming that this extra time would be used to produce sofas, up to how much of an overtime premium per hour should the company be willing to pay to keep the upholstery shop open after normal working hours? 2. A small nearby upholstering company has offered to upholster furniture for Portsmouth at a price of $47 per hour. The management of Portsmouth is confident that this upholstering company's work is high quality and their craftsmen can work as quickly as Portsmouth's own craftsmen on the simpler upholstering Jobs such as the Love Seat How much additional contribution margin per hout can Portsmouth earn it it hires the nearby upholstering company to make Love Seats? 3. Should Portsmouth hire the nearby upholstering company? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required A small nearby upholstering company has offered to upholster Furniture for Portsmouth at a fixed charge of 547 per hour. The management of Portsmouth is confident that this upholstering company's work is high quality and their craftsmen can work as contribution margin per hour can Portsmouth earn if it hires the nearby upholstering company to make Love Seats Show less Additional contribution marginhou
