The Walton Toy Company manufactures a line of dolls and a doll dress sewing kit.
ID: 2446586 • Letter: T
Question
The Walton Toy Company manufactures a line of dolls and a doll dress sewing kit. Demand for the dolls is increasing, and management requests assistance from you in determining an economical sales and production mix for the coming year. The company has provided the following data: Product Demand Next year (units) Selling Price per Unit Direct Materials Direct Labor Debbie 50,000 $13.50 $4.30 $3.20 Trish 42,000 $ 5.50 $1.10 $2.00 Sarah 35,000 $21.00 $6.44 $5.60 Mike 40,000 $10.00 $2.00 $4.00 Sewing kit 325,000 $ 8.00 $3.20 $1.60 The following additional information is available: a. The company’s plant has a capacity of 130,000 direct labor-hours per year on a single-shift basis. The company’s present employees and equipment can produce all five products. b. The direct labor rate of $8 per hour is expected to remain unchanged during the coming year. c. Fixed costs total $520,000 per year. Variable overhead costs are $2 per direct labor-hour. d. All of the company's nonmanufacturing costs are fixed. e. The company’s finished goods inventory is negligible and can be ignored. What is the highest total contribution margin that the company can earn if it makes optimal use of its constrained resource? Please show steps-I know Mike is the constraint-thanks!
Explanation / Answer
1)
Selling price = $4,641,000
Less:
Direct Materials = $1,606,600
Direct labor = $2,418,880
___________________________
Contribution Margin = $615,520
Particulars Amount
Selling Price 50,000 * $13.50 =$675,000
Selling price 42,000 *$ 5.50 =$231,000
Selling price 35,000 * $21.00=$735,000
Selling Price = 40,000 * $10.00=$400,000
Selling price =325,000 *$ 8.00=$2,600,000
________________________________________
Total Selling Price = $4,641,000
Less:
Direct Materials = 50,000 * $4.30=$215,000
Direct Materials = 42,000 * $ 1.10=$46,200
Direct Materials = 35,000 * $6.44=$225,400
Direct Materials = 40,000 *$2.00=$80,000
Direct materials= 325,000 * $3.20=$1,040,000
_______________________________________
Total=$1,606,600
Direct Labor = 50000 * $3.20=$160,000+$132,000,=$292,000
Direct Labor = 42,000 * $2.00=$84,000 +$110,970 =$194,970
Direct Labor = 35,000 * $5.60=$196,000 + $92,480=$288,480
Direct Labor=40,000 *$4.00 =$160,000 + $105,690 =$265,690
Direct labor =325,000 * $1.60=$520,000 +$858,740
________________________________________________
Total = $2,418,880
Direct Labor Explanation for hours and labor hour $8 + Variable overhead costs are $2 =$10
50,000 + 42,000+35,000 + 40,000 + 325,000=492,000
=130,000 * 50,000 / 492,000
=13,200 * 10=132,000,
____________________________
130,000 * 42,000 / 492,000
=11,097 *$10=$110,970
________________________________
130,000 * 35,000 / 492,000
=9,248 * 10=$92,480
_________________________________
130,000 * 40,000 / 492,000
=10,569 * $10=$105,690
____________________________
130,000 * 325,000 / 492,000
=85,874 * $10=$858,740
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