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 laborhours. Information concerning three of Portsmouth's upholstered chairs appears below:
Required:
Portsmouth is considering paying its upholstery laborers hourly compensation, in addition to their usual salaries, to
work overtime. Assuming that this extra time would be used to produce sofas, up to how much of an overtime
premium 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 $ per hour.
The management of Portsmouth is confident that this upholstering company's work is high quality and their 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 if it hires the nearby upholstering company to
make Love Seats?
Should Portsmouth hire the nearby upholstering company?
Complete this question by entering your answers in the tabs below.
Required
Portsmouth is considering paying its upholstery laborers hourly compensation, in addition to their usual salaries, to work
overtime. Assuming that this extra time would be used to produce sofas, up to how much of an overtime premium 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 $ per hour. The
management of Portsmouth is confident that this upholstering company's work is high quality and their craftsmen can work a
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 if it hires the nearby upholstering company to make Love Seats?
Additional contribution margin per hour
