Question

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 $50 $46 15 6 21 4 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 В $ |$ Revenue Less: Variable cost $ $ Contribution margin. Labor hours per unit $ Contribution margin per labor hour 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.

Answer 1

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Ans: Service I B $ 46 Revenue $50 Lexs: Variable Cost (415+45)(941+43) $24 420 $30 Contribution margin + २२ Blo Lab of hours per unit Conteribution margin fer labor hour (Contribution Margin/ Labor hop. c.) | $10 - Any unused Cefacity should be devoted to service B, which has & 1 more conterbution margin per labor hour than does Service A.