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Sports Specialists makes baseballs and softballs in a three-step process. Unfortunately, the sewing machine process has been identified as a bottleneck. Each softball has a contribution margin of $9.00 and each baseball has a contribution margin of $3.00. The sewing machine can make 10 softballs or 25 baseballs in one hour.

A. If demand for both products is unlimited and the sewing machine capacity cannot be expanded. Calcuate the Contribution margin/hour for each product.

	Contribution Margin/hour
Softballs
Baseballs

B. If demand for each ball is limited to 7,000 balls and there are 900 hours available on the machine, how many of each product should be produced?

Softballs
Baseballs

Ken Owens Construction specializes in small additions and repairs. His normal charge is $500/day plus materials. Due to his physical condition, David, an elderly gentleman, needs a downstairs room converted to a bathroom. Ken has produced a bid for $4,900 to complete the bathroom. He did not provide David with the details of the bid. However, they are shown here.

Kens Bid Detail Dollars
Direct Material	$2,200
Direct Labor	1,600
Variable overhead	100
Fixed overhead	600
Profit	400
	$4,900

A. The towns social services has asked Ken if he could reduce his bid to $3,900. Should Ken accept the counter offer?

	Current Bid	New Bid
Direct Material	$2,200	$2,200
Direct Labor	1,600	1,600
Variable overhead	100	100
Fixed overhead	600
Profit	400
	$4,900	$3,900

How much would his income be reduced?

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