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
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
100%
![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.
↑](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F3a2fc1ec-eaf3-4f4a-a36e-aeede7698fa0%2F57b48d21-ab5c-4a6a-9a1c-85c455a79b25%2Foiq2uy_processed.png&w=3840&q=75)
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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