imited Resources

Assume Fender produces only three guitars: the Stratocaster, Dreadnought and Telecaster. A limitation of $720$ labor hours per week prevents Fender from meeting the sales demand for these products. Product information is as follows:

Stratocaster Dreadnought Telecaster

Unit selling price $$1,056$ $$660$ $$1,386$

Unit variable costs $(660)(330)(1,188)$

Unit contribution margin $$396$ $$330$ $$198$

Labor hours per unit $362436$

Required

Determine the weekly contribution from each product when total labor hours are allocated to the product with the highest.

$1.$ Unit selling price.

$2.$ Unit contribution margin.

$3.$ Contribution per labor hour.

$($Hint: Each situation is independent of the others.$)$

Highest

Unit

Selling Price Highest

Contribution

per Unit Highest

Contribution

per Labor Hour

Answer $1$

Answer $2$

Answer $3$

Labor hours available Answer $4$

$0$

Answer $5$

$0$

Answer $6$

$0$

Labor hours per unit Answer $7$

$0$

Answer $8$

$0$

Answer $9$

$0$

Weekly production Answer $10$

$0$

Answer $11$

$0$

Answer $12$

$0$

Unit contribution margin Answer $13$

$0$

Answer $14$

$0$

Answer $15$

$0$

Weekly contribution Answer $16$

$0$

Answer $17$

$0$

Answer $18$

$0$

Determine the opportunity cost the company will incur if management requires the weekly production of $20$ Telecasters. Hint: You want to maximize short$-$run profit. Think about which guitar is most profitable.

$Answer $19$

$0$