Wood Carving Corporation manufactures three products. Because of a recent lack of skilled wood carvers, the corporation has had a shortage of available labor hours. The following per unit data relates to the three products of the corporation: Letter Openers Elvis Statues Candle Holders Selling price $ 30 $ 80 $ 42 Variable cost $ 20 $ 40 $ 20 Labor hours required 1 6 2 Assume that Wood Carving only has 1,800 labor hours available next month. Also assume that Wood Carving can only sell 800 units of each product in a given month. What is the maximum amount of contribution margin that Wood Carving can generate next month given this labor hour shortage? Multiple Choice $12,000 $19,000 $19,600 $19,800

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mltn1980 mltn1980 · Answer 1 · 2019-10-16T03:11:24+02:00

Answer:

$19,600

Prod 1 Prod 2 Prod 3 Income Statement

$ 30 $ 80 $ 42,0 Selling Price

-$ 20 -$ 40 -$ 20,0 Variable Cost

$ 10 $ 40 $ 22,0 Contributing Margin

1 6 2 Labour Hours

10 7 11 Contr. Margin/Hours

200 - 800 Quantity

200 - 1600 Labour Hours Shortage

$ 2,000 - $ 17,600

Explanation:

To maximize the production over the shortage of hours it's necessary

to calculate how much it's the Contribution Marging per hour.

Contr. Margin/Hours Prod1 -> $10, Prod2 -> $7, Prod3 -> $11

Once you have the number you produce as much as you can of the product with the higher Contribution Margin per hour.

As it's detailed: 800 Units of Prod3 and 200 Units of Prod1, it totalized 1.800 hours and $19,600 of Contribution Margin.