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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 Per-service data at
Service Emphasis The following analysis of selected data is for each of the two services Gates Corporation provides. Service A Service B Per-service data at 10,000 services Sales price $36 $32 Service costs: Variable 10 13 Fixed 6 4 Selling and administrative expenses: Variable Fixed 5 3 3 1 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 A B Revenue $ Less: Variable cost Contribution margin 360,000 $ 150,000 x 320,000 x 160,000 $ 210,000 $ 160,000 Labor hours per unit 3 2 Contribution margin per labor hour $ 7 $ 8
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