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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: Recliner $ 1,100 $ 800 6 hours. Sofa $1,650 $ 1,150 Selling price per unit Variable cost per unit Upholstery labor-hours per unit Required: 1. 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? 2. A small nearby upholstering company has offered to upholster furniture for Portsmouth at a price of $47 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 hires the nearby upholstering company to make Love Seats? 3. Should Portsmouth hire the nearby upholstering company? 10 hours. Love Seat $ 1,630 $ 1,150 6 hours Complete this question by entering your answers in the tabs below.

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: Recliner $ 1,100 $ 800 6 hours. Sofa $1,650 $ 1,150 Selling price per unit Variable cost per unit Upholstery labor-hours per unit Required: 1. 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? 2. A small nearby upholstering company has offered to upholster furniture for Portsmouth at a price of $47 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 hires the nearby upholstering company to make Love Seats? 3. Should Portsmouth hire the nearby upholstering company? 10 hours. Love Seat $ 1,630 $ 1,150 6 hours Complete this question by entering your answers in the tabs below.

Cornerstones of Cost Management (Cornerstones Series)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter16: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 24E: Busy-Bee Baking Company produces a variety of breads. The average price of a loaf of bread is 1....
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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: Recliner $ 1,100 $ 800 6 hours Sofa $1,650 $ 1,150 Required 1 Required 2 Selling price per unit Variable cost per unit Upholstery labor-hours per unit Required: 1. 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? 2. A small nearby upholstering company has offered to upholster furniture for Portsmouth at a price of $47 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 hires the nearby upholstering company to make Love Seats? 3. Should Portsmouth hire the nearby upholstering company? 10 hours. Complete this question by entering your answers in the tabs below. Love Seat $ 1,630 $ 1,150 6 hours Required 3 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? Maximum overtime rate per hour
Transcribed Image Text: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: Recliner $ 1,100 $ 800 6 hours Sofa $1,650 $ 1,150 Required 1 Required 2 Selling price per unit Variable cost per unit Upholstery labor-hours per unit Required: 1. 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? 2. A small nearby upholstering company has offered to upholster furniture for Portsmouth at a price of $47 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 hires the nearby upholstering company to make Love Seats? 3. Should Portsmouth hire the nearby upholstering company? 10 hours. Complete this question by entering your answers in the tabs below. Love Seat $ 1,630 $ 1,150 6 hours Required 3 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? Maximum overtime rate per hour
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