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Service Emphasis The following analysis of selected data is for each of the two services Gates Corporation provides. Service A Service B $38 $34 Per-service
Service Emphasis The following analysis of selected data is for each of the two services Gates Corporation provides. Service A Service B $38 $34 Per-service data at 10,000 services Sales price Service costs: Variable Fixed Selling and administrative expenses: Variable Fixed w In the Gates operation, labor capacity is the company's constraining resource. Each unit of A requires 3 hours of labor, and each unit of B requires 2 hours of labor. Assuming that all services can be sold at a normal price, prepare an analysis showing which of the two services should be provided with any unused productive capacity that Gates might have. Service B Revenue - Less: Variable cost R Contribution margin Labor hours per unit Contribution margin per labor hour $ 38 $ 14 0$ 0 0 $ 16 0 0 0 In the Gates operation, labor capacity is the company's constraining resource. Each unit of A requires 3 hours of labor, and each unit of B requires 2 hours of labor. Assuming that all services can be sold at a normal price, prepare an analysis showing which of the two services should be provided with any unused productive capacity that Gates might have. Service Revenue $ Less: Variable cost Contribution margin $ Labor hours per unit Contribution margin per labor hour $ 38 $ 14 0 $ 0 $ 34 16 0 0 0 OAny unused capacity should be devoted to Service B, which has $1 less contribution margin per labor hour than does Service A. OAny unused capacity should be devoted to Service A, which has $1 more contribution margin per labor hour than does Service A. OAny unused capacity should be devoted to Service B, which has $1 more contribution margin per labor hour than does Service A
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