Soft and Cuddly Friends (SCF) produces soft dolls. Demand for the dolls is incre

Question

Soft and Cuddly Friends (SCF) produces soft dolls. Demand for the dolls is increasing, and management wants you to identify an economical sales and production mix for the coming year. The following information is available Demand (units) Price per unit Variable costs 87,000 $ 49.50 42.50 Softy Friendly Goody 72,400 Lovey 123,800 39.50 25.50 $ 35.50 Besty 69,600 60,900 Direct materials Direct labour 5.40 6.40 4.60 4.00 8.40 11.20 6.40 8.00 4.20 3.20 The following additional information is available a. The company's plant has a capacity of 130,000 direct labour-hours per year on a single-shift basis. The company's present employees and equipment can produce all five products b. The direct labour rate is $16 per hour, this rate is expected to remain unchanged during the coming year c. Fixed manufacturing costs amount to $850,000 per year. Variable overhead costs are S7 per direct labour-hour d. All of the company's sales and administrative costs are fixed Required 1. How many total direct labour-hours will be required to produce the units estimated to be sold during the coming year? Show your computations. (Round your answers to 2 decimal places.) DLH Per Unit So Friendly Goody Besty Lovey 2.Keeping in mind the direct labour-hour capacity, what should be the company's product mix for the upcoming year? Prepare a schedule in support of your recommendation. (Round "Per Unit" to 2 decimal places.) Direct Labour-Hour Estimated Product Total Hours Per Unit Sales (Units) Softy Friendly Goody Besty Lovey Total hours required hours hours hours hours hours

Explanation / Answer

1.

2.

3.

Highest price per hr = V.cost per hr + contribution per direct labor hr of besty

= 16 + 15.20 = 31.20

4. Following are the ways with which company could obtain the additional output

adding another shift

contracting out some wor to outside suppliers

employing additional labor force

expanding the workforce

eliminating wasted labour time in the production process

woring over time

calculation of direct labor hr D. labor hr rate(a) D. labor cost DLH per unit (c= b/a) Demand(d) Total labor hr required(c X d) softy 16 6.4 0.4           87,000                                                34,800 friendly 16 4 0.25           72,400                                                18,100 goody 16 11.2 0.7           60,900                                                42,630 besty 16 8 0.5           69,600                                                34,800 lovey 16 3.2 0.2        123,800                                                24,760 Total                                             155,090

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