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 Selling Next Direct Direct Labor 3.85 1.12 5.95 $4.55 0.77 Price year (units) per Unit 74,000 Product Materials DebbieRequired 1 Required 2 Required 3 Required 4 Required 5 How many direct labor hours are used to manufacture one unit of each oRequired 2 Required 5 Required 1 Required 3 Required 4 How much variable overhead cost is incurred to manufacture one unit ofRequired 1 Required 2 Required 3 Required 5 Required 4 What is the contribution margin per direct labor-hour for each of theRequired 1 Required 2 Required 3 Required 4 Required 5 Assuming that direct labor-hours is the companys constraining resourcRequired 2 Required 3 Required 5 Required 1 Required 4 Assuming that the company has made optimal use of its 152,800 direct l

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Answer #1
Calculation of direct labor hours per unit = Direct labor cost per unit/Rate per hour
Direct labor Cost Rate per hour Direct Labor hours per unit
Debbie 3.85 7 0.55
Trish 1.12 7 0.16
Sarah 5.95 7 0.85
Mike 4.55 7 0.65
Sewing Kit 0.77 7 0.11
Calculation of variable overhead cost per unit
Variable overhead cost per unit = Labor hours per unit*Variable overhead cost per unit
Direct Labor hours per unit Rate per hour Variable overhead cost per unit
Debbie 0.55 3 1.65
Trish 0.16 3 0.48
Sarah 0.85 3 2.55
Mike 0.65 3 1.95
Sewing Kit 0.11 3 0.33
Debbie Trish Sarah Mike Sewing kit
Selling price per unit 25.5 5.2 33 17 10.4
Direct Material 5.1 2 10.04 4.4 5.6
Direct Labor 3.85 1.12 5.95 4.55 0.77
Variable overhead 1.65 0.48 2.55 1.95 0.33
Contribution Margin per Unit (A) 14.9 1.6 14.46 6.1 3.7
Direct Labor hours per unit (B) 0.55 0.16 0.85 0.65 0.11
Contribution margin per direct labor hour(A/B) 27.09090909 10 17.01176471 9.384615 33.64
4.Labor hours will be allocated on the basis of maximum contribution margin per hour
Product Units Labor hours per unit Total Labor hours Contribution Margin
Debbie 74,000 0.55 40,700 1,102,600
Trish 66,000 0.16 10,560 105,600
Sarah 59,000 0.85 50,150 853,140
Mike 20,000 0.65 13,000 122,000
Sewing Kit 349,000 0.11 38,390 1,291,300
Total 152,800 3,474,640
5.highest direct labor rate per hour = Cost + Contribution margin per hour
=$7+9.38
16.38
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