Question
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
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: Belling price per unit Variable cost per unit Upholstery labor-hours per unit $ $ Recliner Sofa. 1,230 $ 2,240 $ 1,570 750 $ 1,400 $ 1,150 8 hours 14 hours 6 hours Love Seat 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? of $57 per hour. The management 2. A small nearby upholstering company has offered to upholster furniture for Portsmouth at a of Portsmouth is confident that this uphole ng company's work is high quality and their craftsmen can work as quickly as Portsmouth's own craftsmen on the simple pholstering jobs such as the Love Seat. How much additional contribution margin per hour can Portsmouth earn if if 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 3 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? Maximum overtime premium per hour Required 2>
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