Portsmouth Company makes fine colonial reproduction furniture. Upholstered furniture is one of its major product lines and the bottleneck on this production line is time in the upholstery shop. Upholstering is a craft that takes years of experience to master and the demand for upholstered furniture far exceeds the company's capacity in the upholstering shop. Information concerning three of the company's upholstered chairs appears below: Recliner Sofa Love Seat Selling price per unit $1,400 $ 1,800 $ 1,500 Variable cost per unit $800 $1.200 $1,000 Upholstery shop time required to produce one unit 8 hrs 10 hrs 5 hrs Required: 1. More time could be made available in the upholstery shop by asking the employees who work in this shop to work overtime. Assuming this extra time would be used to produce sofas, up to how much of a premium should the company be willing to pay these employees per hour to keep the upholstery shop open after hours? 2. A small nearby upholstering company has offered to upholster furniture for Portsmouth at a fixed charge of $45 per hour. The management of Portsmouth is confident that this upholstering company's work is high quality and their upholsterers should be able to work about as quickly as Portsmouth's own upholsterers on the simpler jobs such as the love seat. Should management accept the offer? Explain