Francis Corporation manufactures and sells three different types of water-sport wakeboards. The boards vary in terms of their quality specifications—primarily with respect to their smoothness and finish. They are referred to as Smooth, Extra-Smooth, and Super Smooth boards. Machine time is limited. More machine time is required to manufacture the Extra-Smooth and Super-Smooth boards. Additional information is provided below.

Instructions 

Answer each of the following questions.

(a) Ignoring the machine time constraint, what strategy would appear optimal?

(b) What is the contribution margin per unit of limited resource for each type of board?

(c) If additional machine time could be obtained, how should the additional capacity be used?

Transcribed Image Text:

Selling price Variable costs and expenses Contribution margin Machine hours required Total fixed costs: $234,000 Smooth $60 50 $10 0.25 Product Extra-Smooth $100 75 $ 25 0.40 Super-Smooth $160 130 $ 30 0.60