Web Resources, Inc., provides webpage services to small businesses. The company’s services include the preparation of basic pages and custom pages. The following summary of information will be used to make several short run decisions for Web Resources:

Total annual fixed costs are $78,000.

One of Web Resources’ two graphic designers is planning to take leave in May and June. As a result, there will be only one designer available to perform the work, and design labor hours will be a resource constraint. The manager plans to help the other designer complete the projected 200 orders for basic pages and 50 orders for custom pages for those two months. However, she wants to know which type of page Web Resources should advertise and market. Although custom pages have a higher contribution margin per service, each custom page requires 15 design hours, whereas basic pages require only 2 design hours per page. On which page type should the company focus? Explain your answer.

Transcribed Image Text:

Service revenue per page Variable costs per page Contribution margin per page Basic Pages $160 80 $ 80 Custom Pages $500 200 $300 Service revenue per page Variable costs per page Contribution margin per page Basic Pages $160 80 $ 80 Custom Pages $500 200 $300

Answer rating: 100% (QA)

Firstly we have to compute the contribution per limiting factor Ba... View the full answer