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The following analysis of selected data is for each of the two services. Service A Service B Per-service data at 10,000 services Sales price Service costs: Variable Fixed Selling and administrative expenses: Variable Fixed $27 7 6 5 3 LAF $23 8 4

The following analysis of selected data is for each of the two services. Service A Service B Per-service data at 10,000 services Sales price Service costs: Variable Fixed Selling and administrative expenses: Variable Fixed $27 7 6 5 3 LAF $23 8 4

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Service Emphasis 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 Service costs: Variable Fixed Selling and administrative expenses: Variable Fixed Revenue Less: Variable cost Contribution margin Labor hours per unit Contribution margin per labor hour $ 5 Check S $27 A 7 6 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. 5 3 Service $ $ $23 $ 8 4 3 1 B CAny unused capacity should be devoted to Service B, which has $1 less contribution margin per labor hour than does Service A. CAny unused capacity should be devoted to Service A, which has $1 more contribution margin per labor hour than does Service A. CAny unused capacity should be devoted to Service B, which has $1 more contribution margin per labor hour than does Service A. ↑
Transcribed Image Text:Service Emphasis 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 Service costs: Variable Fixed Selling and administrative expenses: Variable Fixed Revenue Less: Variable cost Contribution margin Labor hours per unit Contribution margin per labor hour $ 5 Check S $27 A 7 6 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. 5 3 Service $ $ $23 $ 8 4 3 1 B CAny unused capacity should be devoted to Service B, which has $1 less contribution margin per labor hour than does Service A. CAny unused capacity should be devoted to Service A, which has $1 more contribution margin per labor hour than does Service A. CAny unused capacity should be devoted to Service B, which has $1 more contribution margin per labor hour than does Service A. ↑
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