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

Question

6. 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:

The following additional information is available:  

The company’s plant has a capacity of 80,520 direct labor-hours per year on a single-shift basis. The company’s present employees and equipment can produce all five products.

The direct labor rate of $5 per hour is expected to remain unchanged during the coming year.

Fixed manufacturing costs total $590,000 per year. Variable overhead costs are $2 per direct labor-hour.

All of the company’s nonmanufacturing costs are fixed.

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 80,520 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)?

Product Demand
Next year
(units) Selling
Price
per Unit Direct
Materials Direct
Labor Debbie 57,000 $ 23.00 $ 5.00 $ 1.50 Trish 49,000 $ 7.00 $ 1.80 $ 0.60 Sarah 42,000 $ 41.00 $ 7.49 $ 3.00 Mike 45,500 $ 10.00 $ 2.70 $ 2.00 Sewing kit 332,000 $ 8.70 $ 3.90 $ 0.35 Complete this question by entering your answers in the tabs below Required 1 Required 2 Required 3 Required 4 Required 5 How many direct labor hours are used to manufacture one unit of each of the company's five products? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Debbie Trish Sarah Mike Sewing Kit Direct labor hours per unit

Explanation / Answer

1) Debbie Trish Sarah Mike Sewing kit direct labor cost per unit 1.5 0.6 3 2 0.35 direct labor rate per hour 5 5 5 5 5 direct labor hrs per unit 0.3 0.12 0.6 0.4 0.07 2) variable overhead cost incurred Debbie Trish Sarah Mike Sewing kit variable overhead cost per hour 2 2 2 2 2 direct labor hours per unit 0.3 0.12 0.6 0.4 0.07 variabe overhead cost incurred 0.6 0.24 1.2 0.8 0.14 3) total contribution margin Selling price 23 7 41 10 8.7 less:Variable costs direct materials 5 1.8 7.49 2.7 3.9 direct labor 1.5 0.6 3 2 0.35 variable overhead 0.6 0.24 1.2 0.8 0.14 total variable costs 7.1 2.64 11.69 5.5 4.39 contribution margin per unit 15.9 4.36 29.31 4.5 4.31 direct labor hours per unit 0.3 0.12 0.6 0.4 0.07 contribution margin per hours 53.00 36.33 48.85 11.25 61.57 answer 4) DLH per estimated total product unit sale units hours Debbie 0.3 57,000 17100 trish 0.12 49,000 5880 Sarah 0.6 42,000 25200 mike 0.4 45,500 18200 sewing kit 0.07 332,000 23240 total hours required 89620 Allocated units contribut total total produced per unit contribution product hours Debbie 17,100 57,000 15.9 906300 trish 5,880 49,000 4.36 213640 Sarah 25,200 42,000 29.31 1231020 mike 9,100 22,750 4.5 102375 sewing kit 23,240 332,000 4.31 1430920 total hours required 80,520 3884255 answer 5) highest price will be   $5direct labor rate +$11.25 contribution margin per hours 16.25 answer

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