Garner Corporation Has Met All Production Requirements for the Current

Garner Corporation has met all production requirements for the current month and has an opportunity to manufacture additional units with its excess capacity. Unit selling prices and unit costs for three product lines follow. $\begin{array}{lrrr}&\underline{\text { Small }} & \underline{\text { Medium }} &\underline{ \text { Large }} \\\text { Selling price } & \$ 60 & \$ 86 & \$ 85 \\\text { Direct material } & 22 & 26 & 32 \\\text { Direct labour (at \$28 per hour) } & 14 & 21 & 28 \\\text { Variable overhead } & 10 & 22 & 26 \\\text { Fixed overhead } & 8 & 17 & 8\end{array}$ Variable overhead is applied on the basis of direct labour dollars, whereas fixed overhead is applied on the basis of machine hours. There is sufficient demand for the additional manufacture of all products.
Required:
A. If Garner Corporation has excess machine capacity and can add more labour as needed with no constraints, which product is the most attractive to produce?
B. If Garner Corporation has excess machine capacity but a limited amount of labour time available, which product or products should be manufactured in the excess capacity?

Correct Answer:

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