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: 18 Product Debbie Trish Sarah Mike Sewing kit Demand Selling Next year Price (units) per Unit 56,000 $28.50 48,000 $ 6.50 41,000 $ 40.50 32,000 $16.00 331,000 $ 8.60 Direct Materials $4.90 $1.70 $7.34 $2.60 $3.80 Direct Labor $ 4.40 $ 1.28 $ 6.80 $ 5.20 $ 0.88 The following additional information is available: a. The company's plant has a capacity of 120,140 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 $580,000 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 negligible and can be ignored.

Answer 1

Direct Product Demand Selling Price Direct Labor Material Debbie 56000 28.50 4.90 4.40 Trish 48000 6.50 1.70 1.28 Sarah 40.50 7.34 6.80 Mike 32000 16.00 2.60 5.20 Sewing Kit 331000 8.60 3.80 0.88 Direct Labor Hours Available 120140 Variable Overhead cost Per Unit Direct Labour Hour Rate Clacullations Variable Contribution Contriution Product Direct Labor Direct Labors Margin Per Required Margin Cost DLH Debbie 4.40 2.75 16.5 29.91 Trish 1.28 0.16 0.8 17.00 Sarah 6.80 0.85 4.25 22.1 26.01 Mike 5.20 0.65 3.25 5.0 7.62 Sewing Kit 0.88 0.11 0.55 3.4 30.64 Variable Overhead Cost Per Unit = Direct Labor * DL Required *Variable OH Rate Contribution Margin = Selling Price- DM - DL - Varaible OH Contribution Margin Per DLH = Contribution Margin / DL Required 0.55 2.7

Product Debbie Trish Sarah Mike Sewing Kit Direct Labors Direct Labour Contribution Demand Total Hours Required Allocated Margin 560001 0.55 30800 30800 921200 48000 0.16 7680 7680 130560 41000 0.85 34850 34850 906510 32000 20800 10400 79200 331000 0.11 36410 36410 1115470 Total Contribution Margin 3152940 0.65 Answers Debbie 0.55 Trish 0.16 Sarah 0.85 Mike 0.65 Sewing Kit 0.11 Direct Labour Hours Per Unit Debbie 2.75 2 Variable OH Cost Per Unit Trish 0.80 Sarah 4.25 Mike 3.25 Sewing Kit 0.55 Debbie 29.91 Trish 17.00 Sarah 26.01 Mike Sewing Kit 7.62 30.64 Contribution Margin Per DLH 4 Highest Contibution Margin 3152940 5 Highest DLH per Hour (7+9) 15.62