A company produces three products, and is currently facing a labor shortage; only 3,500 hours...
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Accounting
A company produces three products, and is currently facing a labor shortage; only 3,500 hours are available this month. The selling prices, costs, labor requirements, and demand for the three products are as follows:
| Product A | Product B | Product C | |
|---|---|---|---|
| Sales price | $ 64.00 | $ 36.00 | $ 47.00 |
| Variable cost per unit | $ 52.00 | $ 21.00 | $ 40.00 |
| Direct labor hours per unit | 1.1 | 3.3 | 1.9 |
| Demand (units) | 1,500 | 2,400 | 1,500 |
Required:
- In what order should the company prioritize production of the products?
- How many of each product should be produced during the labor shortage to maximize profit?
- What is the total contribution margin if production is prioritized according to its limited resources?
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