Question

The Walton Toy Company manufactures a line of dolls 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 Product Debbie Trish Sarah Mke Sewing it Demand Next year (units) 58,000 50,000 43,000 48000 333,000 Selling Price per Unit $26.00 $7.50 $41.50 $1100 $ 8.80 Direct Materials $5.10 $1.90 $764 $280 $4.00 Direct Labor $2.10 $0.78 $3.90 $2.70 $0.48 The following additional information is available: a. The company's plant has a capacity of 92,190 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 $6 per hour is expected to remain unchanged during the coming year c. Fixed costs total $600,000 per year. Variable overhead costs are $3 per direct labor-hour d All of the company's nonmanufacturing costs are fixed • The company's finished goods inventory is negligible 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 Contribution Margin per DLH Debbie Trish Sarah Mike Sewing kit 2. Calculate the the total direct labor hours that will be required to produce the units estimated to be sold during the coming year (Do not round intermediate calculations.) Total Hours Product Debbie Trish Sarah Sewing Total hours required

Answer 1

Part 1

Product	Selling price per unit	Direct material per unit	Direct labour per unit	labour rate per hour	Direct labour hours required unit of production*	Variable overhead per direct labour hour	Variable overhead per unit**	contribution per unit***	contribution margin per DLH****
(A)	(B)	(C )	(D)	(E )	(F) = (D)/(E )	(G)	(H) = (G)*(F)	(I) = (B)-(C )-(D)-(H)	(J) = (I)/(F)
Debble	26	5.1	2.1	6	0.35	3	1.05	17.75	50.71
Trish	7.5	1.9	0.78	6	0.13	3	0.39	4.43	34.08
Sarah	41.5	7.64	3.9	6	0.65	3	1.95	28.01	43.09
Mike	11	2.8	2.7	6	0.45	3	1.35	4.15	9.22
Sewing Kit	8.8	4	0.48	6	0.08	3	0.24	4.08	51
*Direct labour hours required unit of production = Direct labour per unit/ labour rate per hour
**Variable overhead per unit = Variable overhead per direct labour hour* Direct labour hours required unit of production
***contribution per unit = Selling price per unit - Direct material per unit - Direct labour per unit - Variable overheads per unit
**** contribution margin per DLH = contribution per unit/ Direct labour required unit of production

Part 2

Product	Demand Next Year	Direct labour hours required unit of production	Required Direct labours to meet the demand*
(A)	(B)	(C )	(D) = (B)*(C )
Debble	58000	0.35	20300
Trish	50000	0.13	6500
Sarah	43000	0.65	27950
Mike	48000	0.45	21600
Sewing Kit	333000	0.08	26640
Total direct labour required			102990
*Required Direct labours to meet the demand = Demand Next Year* Direct labour hours required unit of production

Part 3

Product	contribution margin per DLH	Ranking*	Required hours	Allocated hours**
(A)	(B)	(C )	(D)	(E )
Debble	50.71	II	20300	20300
Trish	34.08	IV	6500	6500
Sarah	43.09	III	27950	27950
Mike	9.22	V	21600	10800
Sewing Kit	51	I	26640	26640
*Ranking for direct labour hours allocation is done based on highest contribution margin per DLH
** Direct labour hours are allocated based on the ranking upto the maximum of 92190 of the total available direct labour hours

Part 4

Product	Allocated hours	contribution margin per DLH	Contribution Margin
(A)	(B)	(C )	(D) = (B)*(C )
Debble	20300	50.71	1029500
Trish	6500	34.08	221500
Sarah	27950	43.09	1204430
Mike	10800	9.22	99600
Sewing Kit	26640	51.00	1358640
Total			3913670

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