Pinewood Furniture manufactures a small table and a large table.The small table sells for $800,has variable costs of $780 per table,and takes 7.50 labor hours to manufacture.The large table sells for $1,600,has variable costs of $900,and takes 10 direct labor hours to manufacture.If the company has no sales limitations on either product,it should make and sell as many of the large tables as possible to maximize operating income.

Question

Quizplus · Accepted Answer

The large table has a higher contribution margin per labor hour than the small table ($70 per hour vs. $20 per hour). Therefore, the company should make and sell as many of the large tables as possible to maximize operating income.

Pinewood Furniture Manufactures a Small Table and a Large Table