The following analysis of selected data is for each of the two services Gates Corporation provides. Service A Service B Per-service data at 10,000 services Sales price $50 $46 Service costs: Variable 15 21 Fixed 6 4 Selling and administrative expenses: Variable 5 3 Fixed 3 1 In the Gates operation, labor capacity is the company's constraining resource. Each unit of A requires 3 hours of labor, and each unit of B requires 2 hours of labor. Assuming that all services can be sold at a normal price, prepare an analysis showing which of the two services should be provided with any unused productive capacity that Gates might have. Service A B Revenue Answer Answer Less: Variable cost Answer Answer Contribution margin Answer Answer Labor hours per unit Answer Answer Contribution margin per labor hour Answer Answer Any unused capacity should be devoted to Service B, which has $1 less contribution margin per labor hour than does Service A. Any unused capacity should be devoted to Service A, which has $1 more contribution margin per labor hour than does Service A. Any unused capacity should be devoted to Service B, which has $1 more contribution margin per labor hour than does Service A.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Question

The following analysis of selected data is for each of the two services Gates Corporation provides.

	Service A	Service B
Per-service data at 10,000 services
Sales price	$50	$46
Service costs:
Variable	15	21
Fixed	6	4
Selling and administrative expenses:
Variable	5	3
Fixed	3	1

In the Gates operation, labor capacity is the company's constraining resource. Each unit of A requires 3 hours of labor, and each unit of B requires 2 hours of labor. Assuming that all services can be sold at a normal price, prepare an analysis showing which of the two services should be provided with any unused productive capacity that Gates might have.

	Service
	A	B
Revenue	Answer	Answer
Less: Variable cost	Answer	Answer
Contribution margin	Answer	Answer
Labor hours per unit	Answer	Answer
Contribution margin per labor hour	Answer	Answer

Any unused capacity should be devoted to Service B, which has $1 less contribution margin per labor hour than does Service A.

Any unused capacity should be devoted to Service A, which has $1 more contribution margin per labor hour than does Service A.

Any unused capacity should be devoted to Service B, which has $1 more contribution margin per labor hour than does Service A.

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 3 steps with 1 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions