The Walton Toy Company manufactures a line of dolls and a sewing kit. Demand for

Question

The Walton Toy Company manufactures a line of dolls and a sewing kit. Demand for the company's products 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 Next Selling Direct Direct (units) per Unit Materials Labor $2.70 $1.20 4.50 $ 3.30 $0.90 year Price Product Debbie Trish Sarah Mike Sewing kit $4.40 $1.20 $6.59 $2.10 $3.30 51,000 $15.50 43,000 6.00 36,000 $25.00 40,000 $11.00 326,000 8.10 The following additional information is available a. The company's plant has a capacity of 118,450 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 $6 per hour is expected to remain unchanged during the coming year c. Fixed manufacturing costs total $530,000 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 Required: 1. How many direct labor hours are used to manufacture one unit of each of the company's five products? 2. How much variable overhead cost is incurred to manufacture one unit of each of the company's five products? 3. What is the contribution margin per direct labor-hour for each of the company's five products? 4. Assuming that direct labor-hours is the company's constraining resource, what is the highest total contribution margin that the company can earn if it makes optimal use of its constrained resource? 5. Assuming that the company has made optimal use of its 118,450 direct labor-hours, what is the highest direct labor rate per hour that Walton Toy Company would be willing to pay for additional capacity (that is, for added direct labor time)? Complete this question by entering your answers in the tabs below

Explanation / Answer

Req 1: DEBBIE TRISH SARAH MIKE SEWING KIT Labour cost per unit 2.70 1.20 4.50 3.30 0.90 labour rate perr hour 6.00 6.00 6.00 6.00 6.00 labour horus per unit required 0.45 0.20 0.75 0.55 0.15 Req 2 DEBBIE TRISH SARAH MIKE SEWING KIT Labour cost per unit 2.70 1.20 4.50 3.30 0.90 labour rate perr hour 6.00 6.00 6.00 6.00 6.00 labour horus per unit required 0.45 0.20 0.75 0.55 0.15 Variable OH rate per hour 3.00 3.00 3.00 3.00 3.00 variable cost per unit 1.35 0.60 2.25 1.65 0.45 Req 3: DEBBIE TRISH SARAH MIKE SEWING KIT Selling price 15.50 6.00 25.00 11.00 8.10 Less: variable cost Material 4.40 1.20 6.59 2.10 3.30 Labour 2.70 1.20 4.50 3.30 0.90 Overheads 1.35 0.60 2.25 1.65 0.45 Contribution margin per unt 7.05 3.00 11.66 3.95 3.45 Divide: Labour hrs 0.45 0.20 0.75 0.55 0.15 Contribution mamrgin per hour 15.67 15.00 15.55 7.18 23.00 Ranking II IV III V I Req 4: Total Hours available: 118450.00 Less: Distributed in order of ranking Sewing Kit (326000*0.15) 48900 Debbie (51000*0.45) 22950 Sarah (36000*0.75) 27000 Trish (43000*.20) 8600 Hours available for Mike 11000.00 Contribution earned Hrs Contribution per hour Contributuon mrgin Debbie 22950 15.67 359626.5 Trish 8600 15 129000 Sarah 27000 15.55 419850 Mike 11000 7.18 78980 Sewing kit 48900 23 1124700 Total OH 2112157 Req 5: Additional hourrs will be used for production of Mike only. Therefore, the company is ready to pay only additional contribution margin per hour of mike. Maximum prie per hour to be paid: Exiting rate 6 Add: Contribution margin per hour of Mike 7.18 Maximum price per hour to be paid: 13.18

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