Soft and Cuddly Friends (SCF) produces soft dolls. Demand for the dolls is incre
ID: 2554403 • Letter: S
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:
The company’s plant has a capacity of 110,000 direct labour-hours per year on a single-shift basis. The company’s present employees and equipment can produce all five products.
The direct labour rate is $14 per hour; this rate is expected to remain unchanged during the coming year.
Fixed manufacturing costs amount to $700,000 per year. Variable overhead costs are $5 per direct labour-hour.
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.)
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.)
What is the highest price, in terms of a rate per hour, that SCF would be willing to pay for additional capacity (i.e., for added direct labour time)?
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:
Explanation / Answer
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Softy Friendly Goody Besty Lovey Direct Labor Cost per unit (A) 5.6 3.5 9.8 7 2.8 Direct Labor Cost per hour (B) 14 14 14 14 14 Direct labor Hour per unit (A/B) 0.4 0.25 0.7 0.5 0.2 2 Softy Friendly Goody Besty Lovey Price per unit (A) 27 12 43 21 17 Direct material Cost per unit (B) 11.75 3.75 17.1 6 9 Direct labor Cost (C 5.6 3.5 9.8 7 2.8 Variable Cost (D) ($5*Direct labor per unit) 2 1.25 3.5 2.5 1 Contrbution Margin per unit E=(A-B-C-D) 7.65 3.5 12.6 5.5 4.2 Direct Labor hour required per unit (F) 0.4 0.25 0.7 0.5 0.2 Contrbution margin per direct labor hour (E/F) 19.125 14 18 11 21 Preferrence II Iv III V I Product Direct Labor Hours per unit Estimated Sales Unit Total Hours Softy 0.4 hours 72000 28800 Friendly 0.25 hours 60400 15100 Goody 0.7 hours 50400 35280 Besty 0.5 hours 20520 10260 Lovey 0.2 hours 102800 20560 110000 maximum Can pay per direct labor hour 14+14 $28.00Related Questions
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