Soft and Cuddly Friends (SCF) produces soft dolls. Demand for the dolls is incre

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 Demand (units) Price per unit Variable costs 70,000 58,800 49,000 56,000 100,000 $ 24.00 27.00 37.00 $ 21.00 $ 34.00 Direct materials Direct labour 10.30 7.00 16.50 8.50 19.00 9.80 6.50 9.10 17.50 8.40 The following additional information is available a. The company's plant has a capacity of 180,000 direct labour-hours per year on a single-shift basis. The company's present employees and equipment can produce all five products b. The direct labour rate is $13 per hour; this rate is expected to remain unchanged during the coming year c. Fixed manufacturing costs amount to $558,000 per year. Variable overhead costs are $2 per direct labour-hour d. All of the company's sales and administrative costs are fixed Required 1. 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.) DLH Per Unit Softy Friendly Goody es Lovey

Explanation / Answer

1 Softy Friendly Goody Besty Lovey Direct Labor Cost per unit (A) 7 8.5 9.8 9.1 8.4 Direct Labor Cost per hour (B) 13 13 13 13 13 Direct labor Hour per unit (A/B)        0.538         0.654            0.754           0.700       0.646 2 Softy Friendly Goody Besty Lovey Price per unit (A) 24 27 37 21 34 Direct material Cost per unit (B) 10.3 16.5 19 6.5 17.5 Direct labor Cost (C 7 8.5 9.8 9.1 8.4 Variable Cost (D) ($2*Direct labor per unit)            1.1              1.3                1.5               1.4            1.3 Contrbution Margin per unit E=(A-B-C-D)          5.62            0.69              6.69             4.00          6.81 Direct Labor hour required per unit (F)        0.538         0.654            0.754           0.700       0.646 Contrbution margin per direct labor hour (E/F)        10.44            1.06              8.88             5.71       10.54 Preferrence II v III IV I Product Direct Labor Hours per unit Estimated Sales Unit Total Hours Softy        0.538 hours 70000        37,692 Friendly        0.654 hours 2376           1,554 Goody        0.754 hours 49000        36,938 Besty        0.700 hours 56000        39,200 Lovey        0.646 hours       100,000        64,615      180,000 maximum Can pay per direct labor hour 13+1.06 $14.06

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