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

Question

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 Demand Next Selling year Price Direct Direct Product Debbie Trish Sarah Mike Sewing kit 71,000 $17.50 63,000 6.00 56,000 $31.50 47,600 $13.00 346,000 $10.10 (units) per Unit Materials Labor $ 3.20 1.60 $5.60 4.00 1.20 $4.80 $1.70 $9.59 $4.10 $5.30 The following additional information is available a. The company's plant has a capacity of 144,000 direct labor-hours per year on a single-shift basis. The company's present employees and equipment can produce all five products b. The direct labor rate of $8 per hour is expected to remain unchanged during the coming year c. Fixed manufacturing costs total $595,000 per year. Variable overhead costs are $3 per direct labor-hour d. All of the company's nonmanufacturing costs are fixed e. The company's tinished goods inventory is negligible and can be ignored

Explanation / Answer

Solution:

1.

Debbie Trish Sarah Mike Sewing kit Direct labor cost per unit 3.2 1.6 5.6 4 1.2 Direct labor hours per unit 0.4 0.2 0.7 0.5 0.15 (direct labor cost/$8) Selling price 17.5 6 31.5 13 10.1 Variable costs: Direct Material 4.8 1.7 9.59 4.1 5.3 Direct Labor 3.2 1.6 5.6 4 1.2 Variable overhead (direct labor hour x $3) 1.2 0.6 2.1 1.5 0.45 Total variable costs 9.2 3.9 17.29 9.6 6.95 Contribution margin 8.3 2.1 14.21 3.4 3.15 Contribution margin per DLH 20.75 10.5 20.3 6.8 21

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