The company will sell a desk only with a chair and can sell 500 desks per month. The units (desk with chair) sell for $312 each and have a variable cost of $129 each. Required: a. Is there a bottleneck at CompDesk in Building 1 or Building 2? b. CompDesk’s production supervisors state they could increase building 1’s capacity by 100 desks per month by producing desks on the weekend. Producing on the weekend would not affect the sales price. Variable cost per unit would increase by $29 for those produced on the weekend because of the premium paid to labor. Fixed costs would also increase by $20,800 per month. b-1. Calculate the differential operating profit (loss). b-2. Should CompDesk produce desks on the weekend? c. Independent of the situation in requirement (b), CompDesk could add additional equipment and workers to building 1, which would increase its capacity by 100 desks per month. This would not affect the sales price or variable cost per unit but would increase fixed costs by $15,400 per month. c-1. Calculate the differential operating profit (loss). c-2. Should CompDesk add the additional equipment and workers to building 1?
CompDesk, Inc., makes a single model of an ergonomic desk (with chair) for computer usage. The desk is manufactured in building 1, and the chair is manufactured in building 2. Monthly capacities and production levels are as follows.
| Building 1 (Desks) | Building 2 (Chairs) | |
| Monthly capacity | 400 | 500 |
| Monthly production | 400 | 400 |
The company will sell a desk only with a chair and can sell 500 desks per month. The units (desk with chair) sell for $312 each and have a variable cost of $129 each.
Required:
a. Is there a bottleneck at CompDesk in Building 1 or Building 2?
b. CompDesk’s production supervisors state they could increase building 1’s capacity by 100 desks per month by producing desks on the weekend. Producing on the weekend would not affect the sales price. Variable cost per unit would increase by $29 for those produced on the weekend because of the premium paid to labor. Fixed costs would also increase by $20,800 per month.
b-1. Calculate the differential operating
b-2. Should CompDesk produce desks on the weekend?
c. Independent of the situation in requirement (b), CompDesk could add additional equipment and workers to building 1, which would increase its capacity by 100 desks per month. This would not affect the sales price or variable cost per unit but would increase fixed costs by $15,400 per month.
c-1. Calculate the differential operating profit (loss).
c-2. Should CompDesk add the additional equipment and workers to building 1?
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