P19-3B Lorge Corporation manufactures and sells three different models of exterior doors. Although the doors vary in terms of quality and features, all are good sellers. Lorge is currently operating at full capacity with limited machine time. Sales and production information relevant to each model is shown on the next page.
|
Product |
|||
|
Economy |
Standard |
Deluxe |
|
|
Selling price |
$270 |
$450 |
$650 |
|
Variable costs and expenses |
$150 |
$261 |
$425 |
|
Machine hours required |
0.6 |
0.9 |
1.2 |
Instructions
(a) Ignoring the machine time constraint, which single product should Lorge produce?
(b) What is the contribution margin per unit of limited resource for each product?
(c) If additional machine time could be obtained, how should the additional time be used?