*Please check numbers and answer all parts to the question(s).* The Walton Toy C

Question

*Please check numbers and answer all parts to the question(s).*

The Walton Toy Company manufactures company has provided the following data ne o dolls and a doll dress sev ng kit Demand or he dols is Increasng, and management requests assistance om you n determining an economical sales and production mix or the coming year. The Damand Seling Next year Diract per Unit $17.00 3 8.50 Debbie Trish Sarah Mike Sewing kt 44.000 37.000 40.800 27,000 Materials $4 50 31.30 38.74 32 20 S3.40 $280 31.40 34.90 3.50 $1.05 312.00 3 8.20 The following additional information is available a. The company's plant has a capacity of 114,750 direct labor-hours per year on a single-shift basis. The company's present cmployccs and cquipment can producc all five products. b. The direct labor rate of $7 per hour is expected to remain unchanged during the coming year c. Fixed costs total S540,000 per year. Variable averhead costs are $4 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: Determine the contribution margin per direct labor hour expended on each product. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Product Margin per Dabbie Trish Mike Sewing k

Explanation / Answer

ans)

1. Debbie Trish Sarah Mike SewingKit Direct labor cost per unit.............. .$2.8 $1.4 $4.9 $3.5 $1.05

Direct labor hours per unit* (a)..... 0.4 0.2 0.7 0.5 0.15

Selling price.................................. 17 6.5 26 12 8.2   

Variable costs:

Direct materials......................... (4.5) (1.3) (6.74) (2.2) (3.4)

Direct labor................................ (2.8) (1.4) (4.9) (3.5) (1.05)

Variable overhead ( labour hours X $4) (1.6) (0.8) (2.8) (2) (0.6)

Contribution margin (b)................ 8.1 3 11.56 4.3 3.15

Contribution margin per DLH(b) ÷ (a).... 20.25 15 16.5 8.6 21

* Direct labor cost per unit ÷ 7 direct labor hours.

2 Product Direct labour hours per unit Estimated sales units Total hours

Debbie 0.4 52000 20800

Trish 0.2 44000 8800

Sarah 0.7 37000 25900

Mike 0.5 40800 20400

Sewing kit 0.15 327000 49050

Total hours required 124950

3

Because the Mike doll has the lowest contribution margin per labor hour, its productionshould be reduced by 20,400 dolls (10,200 excess hours divided by 0.5 hours productiontime per doll = 20,400 dolls). Thus, production and sales of the Mike doll will be reducedto one-half of that planned, or 20,400 dolls for the year.

Remaining all will be same as above

4) Product Units produced Cont per unit Total contribution

Debbie 52000 8.1 421200

Trish 44000 3 132000

Sarah 37000 11.56 427720

Mike 20400 4.3 87720

Sewing kit 327000 3.15 1030050

Total contribution 2098690

5) Because the additional capacity would be used to produce the Mike doll, the company should be willing topay up to $15.6 per DLH ($7 usual labor rate plus 8.6 contribution margin per DLH) for added labortime. Thus, the company could employ workers for overtime at the usual time-and-a-half rate of $10.5 per hour ($7 × 1.5 = $10.5) and still improve overall profit

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