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 products appears below:

Required:

Portsmouth is considering paying its upholstery laborers hourly compensation, in addition to their usual

salaries, to work overtime. Assuming this extra time would be used to produce sofas, up to how much of an

overtime rate 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 $$40$ per

hour. The management of Portsmouth is confident this upholstering company's work is high quality, and its

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 it supplies the direct

material and hires the nearby upholstering company to upholster 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 w

overtime. Assuming this extra time would be used to produce sofas, up to how much of an overtime rate per hour shc

company be willing to pay to keep the upholstery shop open after normal working hours?