Pinewood Furniture manufactures a small table and a large table.The small table sells for $800,has variable costs of $750 per table,and takes 7.50 labor hours to manufacture.The large table sells for $1,700,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 contribution margin per unit for the large table is $800 ($1700 - $900), which is higher than the contribution margin per unit for the small table, which is $50 ($800 - $750). Additionally, the large table takes fewer labor hours per unit than the small table. Therefore, the company should focus on producing and selling more of the large tables to maximize its operating income.

Pinewood Furniture Manufactures a Small Table and a Large Table