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:

Required:

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?

A small nearby upholstering company has offered to upholster furniture for Portsmouth at a price of $$48$ per hour.

The management of Portsmouth is confident that this upholstering company's work is high quality and their craftsmen

can work as quickly as Portsmouth's own craftsmen on the simpler upholstering 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?

Should Portsmouth hire the nearby upholstering company?

Complete this question by entering your answers in the tabs below.

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?