Question

The following information applies to the products of Solomon Company. Selling price per unit Variable cost per unit Product A $14 12 Product B $13 10 Identify the product that should be produced or sold under each of the following constraints. Consider each constraint separately. Required a. One unit of Product A requires 1 hour of labor to produce, and one unit of Product B requires 5 hours of labor to produce. Due to labor constraints, demand is higher than the company's capacity to make both products. b. The products are sold to the public in retail stores. The company has limited floor space and cannot stock as many products as it would like. Display space is available for only one of the two products. Expected sales of Product A and Product B are 13,000 units and 11,000 units, respectively. c. The maximum number of machine hours available is 42,000. Product A 2 machine hour and Product Buses 6 machine hours. The company can sell all the products it produces. Complete this question by entering your answers in the tabs below. Required A Required B Required C One unit of Product A requires 1 hour of labor to produce, and one unit of Product B requires 5 hours of labor to produce. Due to labor constraints, demand is higher than the company's capacity to make both products. (Round your answers to 2 decimal places.) Product A Product B Contribution margin per labor hour Which product should be produced? Required A Required B

Answer 1

a.
	Product A	Product B
Selling price per unit	14	13
Variable cost per unit	12	10
Contribution margin per unit	2	3
(/) Labor hour per unit	1	5
Contribution margin per labor hour	2.00	0.60
Which product should be sold	Product A

b.
	Product A	Product B
Contribution margin per unit	2	3
(*) Expected Sales units	13000	11000
Total contribution margin	26000	33000
Which product should be sold	Product B

c.
	Product A	Product B
Contribution margin per unit	2	3
(/) Machine hour per unit	2	6
Contribution margin per labor hour	1.00	0.50
Which product should be sold	Product A