The Walton Toy Company manufactures a line of dol s and a doll dress sewing kit.

Question

The Walton Toy Company manufactures a line of dol s and a doll dress sewing kit. Demand for the dolls 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 DemandPrice Mater540 Next year (un ts) SellingDirect $ 6.50 S30.00 $15.00 347,000 $1020 per Unt Materials $4.90 $1.80 $9.74 $4.20 $5.40 $1.89 S8.75 $4.95 1.44 64,000 57,000 40.000 Sarah Sewing kit The following additional information is available a. The company's plant has a capacity of 155,110 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 $9 per hour is expected to remain unchanged during the coming year c. Fixed costs total $605,000 per year. Variable overhead costs are $5 per direct labor-hour d. All of the company's nonmanufacturing costs are fixed. e. The company's finished goods inventory is negigible and can be ignored. Required: 1. 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 DLH Debbio Trish Sarah Mke Sowing kit

Explanation / Answer

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Calculation of Labour Hour Required for each product Labour Cost Rate per hour Labour hours Demand Labour hrs required Debbie 4.05 9                         0.45 72000 32400 Trish 1.89 9                         0.21 64000 13440 Sarah 6.75 9                         0.75 57000 42750 Mike 4.95 9                         0.55 40000 22000 Sewing Kit 1.44 9                         0.16 347000 55520 Total Labour Hours Required 166110 (1) Statement of Contribution Debbie Trish Sarah Mike Sewing Kit Selling Price 18 6.5 30 15 10.2 Material Cost 4.9 1.8 9.74 4.2 5.4 Labour cost 4.05 1.89 6.75 4.95 1.44 Variable OH                   2.25                    1.05                         3.75           2.75                                 0.80 Contribution                   6.80                    1.76                         9.76           3.10                                 2.56 Labour hrs 0.45 0.21 0.75 0.55 0.16 Cont. per Hour                 15.11                    8.38                       13.01           5.64                               16.00 Ranking                         2                          4                               3                 5                                       1 (2) Total Direct Labour Hours to be Required Product Demnd Hrs per unit Total Labour Hrs Debbie 72000 0.45 32400 Trish 64000 0.21 13440 Sarah 57000 0.75 42750 Mike 40000 0.55 22000 Sewing Kit 347000 0.16 55520 Total Hours Required 166110 (3) Allocation of Labour Hours Product Total Lab Hrs Rank Allocated Hrs Debbie 32400 2 32400 Trish 13440 4 13440 Sarah 42750 3 42750 Mike 22000 5 11000 Sewing Kit 55520 1 55520 166110 155110 (4) Statement of Total Contribution Product Allocated Hrs Cont. per hr Total Cont. Debbie 32400                  15.11            489,600.00 Trish 13440                    8.38            112,640.00 Sarah 42750                  13.01            556,320.00 Mike 11000                    5.64               62,000.00 Sewing Kit 55520                  16.00            888,320.00 155110         2,108,880.00 (5) Addition Highest Price per labour hour Additional Contribution from Mike 5.64

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