Question 3: 17 Marks

Hayden Garden Tools produces two types of rakes with lifetime warranties. The industrial rake requires 2.4 labor hours and the residential rake requires 1.1 labor hours. The company has only 800 available labor hours per week. The company can sell all it can produce of either product.

Industrial Residential

Selling price $360 $210

Variable costs 220 150

Contribution margin $140 $ 60

Instructions:

1. Which rake(s) should the company sell? Justify your answer. (12 marks)

2. What would be the incremental benefit of obtaining 200 additional labor hours? (5 marks)