Limited 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:

Required

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

Unit selling price.

Unit contribution margin.

Contribution per labor hour.

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

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.

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