Answer all questions. Thanks 2402-5017 (8193)-Spring 2018 Chapter 12 Homework Qu

Question

Answer all questions. Thanks

2402-5017 (8193)-Spring 2018 Chapter 12 Homework Question 3 (of 3) value: 5.00 points 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: Demand Selling Next year Price Direct Direct (units) per Unit Materials Labon $3.60 54,000 7.00 $2.30 $1.32 $7.20 $4.80 337,000 9.20 $4.40 $0.72 Product Debbie Trish Sarah Mike Sewing kit 62,000 $20.50 $5.50 47,000 $34.00 $8.24 56,000 $15.00 $3.20 The following additional information is available a. The company's plant has a capacity of 84,160 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 $12 per hour is expected to remain unchanged during the coming year c. Fixed costs total $640,000 per year. Variable overhead costs are $3 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

Explanation / Answer

Part 1 – Contribution Margin Per DLH

Product

Selling Price Per Unit

Direct materials per unit

Direct Labor per unit

Total Variable Cost Per unit

Contribution margin per unit

Direct Labor Hours Needed Per Unit (Direct Labor Cost per unit / DL Rate $12 per hour)

Contribution Margin per DLH

(S)

(A)

(B)

(V = A+B)

(X = S - V)

(L)

(X/L)

Debbie

$20.50

$5.50

$3.60

$9.10

$11.40

0.30

$38.00

Trish

$7.00

$2.30

$1.32

$3.62

$3.38

0.11

$30.73

Sarah

$34.00

$8.24

$7.20

$15.44

$18.56

0.60

$30.93

Mike

$15.00

$3.20

$4.80

$8.00

$7.00

0.40

$17.50

Sewing Kit

$9.20

$4.40

$0.72

$5.12

$4.08

0.06

$68.00

Part 2 – Total Direct Labor Hours required

Product

Demand Next Year

Direct Labor Hour Needed Per Unit

Total Hours

(D)

(L)

(D*L)

Debbie

$62,000

0.30

18600

Trish

$54,000

0.11

5940

Sarah

$47,000

0.60

28200

Mike

$56,000

0.40

22400

Sewing Kit

$337,000

0.06

20220

Total Hours required

95360

Part 3 – Allocated Capacity to various products

This part is related to the optimal product mix by using the constraint resources. The product having highest contribution margin per constraint resources should be produced first and so on the basis of Contribution Margin per constraints

Here the constraint resource is 84,160 DLH.

So we need to prepare an optimal product mix by using these constraint resource and the maximum Demand for next year because it is also a limiting factor that you cannot sell the product beyond that demand.

Product

Hours

Debbie

$18,600

Trish

$5,940

Sarah

$28,200

Mike

$11,200

Sewing Kit

$20,220

Part 4 ---- Highest total contribution margin that company can earn if it makes optimal use of its constrained resource

Product

Hours

Contribution Margin per DLH

Total Contribution Margin

Debbie

$18,600

$38.00

$706,800

Trish

$5,940

$30.73

$182,520

Sarah

$28,200

$30.93

$872,320

Mike

$11,200

$17.50

$196,000

Sewing Kit

$20,220

$68.00

$1,374,960

Total Contribution Margin

$3,332,600

HIghest Price in terms of a rate per hour = $17.50 per hour since all product's demand has been filled by the available labor hours.

Hope the above calculations, working and explanations are clear to you and help you in understanding the concept of question.... please rate my answer...in case any doubt, post a comment and I will try to resolve the doubt ASAP…thank you

Product

Selling Price Per Unit

Direct materials per unit

Direct Labor per unit

Total Variable Cost Per unit

Contribution margin per unit

Direct Labor Hours Needed Per Unit (Direct Labor Cost per unit / DL Rate $12 per hour)

Contribution Margin per DLH

(S)

(A)

(B)

(V = A+B)

(X = S - V)

(L)

(X/L)

Debbie

$20.50

$5.50

$3.60

$9.10

$11.40

0.30

$38.00

Trish

$7.00

$2.30

$1.32

$3.62

$3.38

0.11

$30.73

Sarah

$34.00

$8.24

$7.20

$15.44

$18.56

0.60

$30.93

Mike

$15.00

$3.20

$4.80

$8.00

$7.00

0.40

$17.50

Sewing Kit

$9.20

$4.40

$0.72

$5.12

$4.08

0.06

$68.00

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