Portsmouth Company makes upholstered furniture. Its only variable cost is direct materlals. The demand for...
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Portsmouth Company makes upholstered furniture. Its only variable cost is direct materlals. The demand for the company's products far exceeds its manufacturing capacity. The bottleneck (or constraint) in the production process is upholstery fabor-hours. Information concerning three of Portsmouth's products appears below: Required: 1. Portsmouth is considering paying its uphoistery laborers hourly compensation, in addition to their usual salaries, to work overtime. Assuming this extra time would be used to produce sofas, up to how much of an overtime rate per hour should the company be willing to pay to keep the upholstery shop open after normal working hours? 2. A small nearby upholstering company has offored to upholster furniture for Portsmouth at o price of $57 per hour. The management of Portsmouth is confident this upholstering company's work is high quality, and its craftsmen can work as quickly as Portsmouth's own craftsmen on the simpler upholstering Jobs such as the Love Seat. How much additional contribution margin per hour can Portsmouth earn if it hires the nearby uphoistering company to make Love Seats? 3. Should Portsmouth hire the nearby upholstering company
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