Question
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
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:
StratocasterDreadnoughtTelecasterUnit selling price$1,152$720$1,512Unit variable costs(720)(360)(1,296)Unit contribution margin$432$360$216Labor hours per unit362436
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 PriceHighest
Contribution
per UnitHighest
Contribution
per Labor HourAnswer
Dreadnought
Statocaster
Telecaster
Answer
Dreadnought
Statocaster
Telecaster
Answer
Dreadnought
Statocaster
Telecaster
Labor hours availableAnswer
Answer
Answer
Labor hours per unitAnswer
Answer
Answer
Weekly productionAnswer
Answer
Answer
Unit contribution marginAnswer
Answer
Answer
Weekly contributionAnswer
Answer
Answer
Determine the opportunity cost the company will incur if management requires the weekly production of 20 Telecasters.
$Answer
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Cambridge IGCSE And O Level Accounting Coursebook
Authors: Catherine Coucom
2nd Edition
1316502775, 978-1316502778
