Demand for Stuffin’ Such stuffed animal shells and stuffing/finishing kits manuf

Question

Demand for Stuffin’ Such stuffed animal shells and stuffing/finishing kits manufactured by RoseMarie Limited is increasing, and management requests assistance from you in determining the best sales and production mix for the coming year. The company has provided the following data:

The company’s plant has a capacity of 17,300 direct labour-hours per year on a single-shift basis. The company’s current employees and equipment can produce all five products.

Determine the contribution margin per direct labour-hour expended on each product (the profitability index). (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Prepare a schedule showing the total direct labour-hours that will be required to produce the units estimated to be sold during the coming year.

What is the highest price, in terms of a rate per hour, that Stuffin’ Such should be willing to pay for additional capacity (that is, for added direct labour time)? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Demand for Stuffin’ Such stuffed animal shells and stuffing/finishing kits manufactured by RoseMarie Limited is increasing, and management requests assistance from you in determining the best sales and production mix for the coming year. The company has provided the following data:

Explanation / Answer

Answer a. Teddy Bear Polar Bear Husky Tiger Stufing / Finishing Kits Selling Price                   35.00                  37.00                 30.00                  32.00                    17.00 Variable Costs Direct materials                     6.20                    5.00                   4.20                    4.80                       3.20 Direct Labor                     3.50                    3.00                   5.00                    7.00                       2.00 Variable Overhead - $2 X DLH per Unit                     0.70                    0.60                   1.00                    1.40                       0.40 Total Variable Cost                   10.40                    8.60                 10.20                  13.20                       5.60 Contribution Margin                   24.60                  28.40                 19.80                  18.80                    11.40 Direct Labour Hour per Unit (Direct Labor / $10)                     0.35                    0.30                   0.50                    0.70                       0.20 Contribution Margin per Direct Labor Hour                   70.29                  94.67                 39.60                  26.86                    57.00 Ranking II I IV V III Answer b. Direct Lab. Hr Per Unit Demand in Units Direct Labor Hours Teddy Bear                     0.35                11,500                 4,025 Polar Bear                     0.30                  7,500                 2,250 Husky                     0.50                  8,500                 4,250 Tiger                     0.70                  5,500                 3,850 Stufing / Finishing Kits                     0.20                19,000                 3,800 Total Direct Labor Hours Required              18,175 Answer d. Calculation of No of Units Produced by available Labor Hours: Quantity Labor Hours per unit Total Direct Labor Balance of Direct Labor Total Labor hours available                17,300 Polar Bear Produced                   7,500                    0.30                 2,250                15,050 Teddy Bear Produced                 11,500                    0.35                 4,025                11,025 Stuffing / Finishing Kit Produced                 19,000                    0.20                 3,800                  7,225 Husky Produced                   8,500                    0.50                 4,250                  2,975 Tiger Produced                   4,250                    0.70                 2,975                         -   Additional Labor Hours Required For Tiger - 1,250 Units X 0.70 DLH 875 Calculation of Maximum Price to be Paid for 875 DLH Normal Rate - $10 X 875 Hrs             8,750.00 Contribution on Sale of 1,250 Units - Tiger - $18.80 X 1,250 Units           23,500.00 Total Amount Can be Paid for 875 Hours           32,250.00 Cost per Hour                   36.86

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