Po.20. Limited ResourcesAssume Fender produces only three guitars: the Stratocaster, Dreadnought and Telecaster. A limitation of 720 labor hours per week prevents Fender from meeting the sales demand for these products. Productinformation is as follows:Unit selling priceUnit variable costsUnit contribution marginLabor hours per unitStratocaster Dreadnought Telecaster$540 $1,134(270)(972)$270$1622436RequiredDetermine the weekly contribution from each product when total labor hours are allocated to the product with the highest.1. Unit selling price.2. Unit contribution margin.$864(540)$324363. Contribution per labor hour.(Hint: Each situation is independent of the others.)Labor hours availableLabor hours per unitWeekly productionUnit contribution margin $Weekly contribution$$HighestUnitSelling PriceStatocaster +540HighestContributionper UnitDreadnought$$540HighestContributionper Labor HourTelecaster ♦540$Determine the opportunity cost the company will incur if management requires the weekly production of 20 Telecasters. Hint: You want to maximize short-run profit. Think about which guitar is most profitable.

Opportunity costOpportunity cost is one of the costs which represents the cost or value of the best…

Limited Resources Assume Fender produces only three guitars: the Stratocaster, Dreadnought and Telecaster. A limitation of 720 labor hours per week prevents Fender from meeting the sales demand for these products. Product information is as follows: Unit selling price Unit variable costs. Unit contribution margin Labor hours per unit Stratocaster Dreadnought Telecaster $1,134 (972) $162 36 $864 (540) $324 36 Required Determine the weekly contribution from each product when total labor hours are allocated to the product with the highest. 1. Unit selling price. 2. Unit contribution margin. 3. Contribution per labor hour. (Hint: Each situation is independent of the others.) Labor hours available Labor hours per unit Weekly production Unit contribution margin $ Weekly contribution $ $ $540 (270) $270 24 Highest Unit Selling Price Highest Contribution per Unit Statocaster + Dreadnought 540 $ $ 540 Highest Contribution per Labor Hour Telecaster + 540 $ $ Determine the opportunity cost the company will incur if management requires the weekly production of 20 Telecasters. Hint: You want to maximize short-run profit. Think about which guitar is most profitable.