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:
Product | Demand Next year (units) |
Selling Price per Unit |
Direct Materials |
Direct Labor |
|||
Debbie | 69,000 | $ | 41.00 | $ | 4.60 | $ | 4.00 |
Trish | 61,000 | $ | 4.50 | $ | 1.50 | $ | 1.00 |
Sarah | 54,000 | $ | 30.50 | $ | 9.29 | $ | 7.00 |
Mike | 46,800 | $ | 15.00 | $ | 3.90 | $ | 5.00 |
Sewing kit | 344,000 | $ | 9.90 | $ | 5.10 | $ | 0.50 |
The following additional information is available:
The company’s plant has a capacity of 100,400 direct labor-hours per year on a single-shift basis. The company’s present employees and equipment can produce all five products.
The direct labor rate of $10 per hour is expected to remain unchanged during the coming year.
Fixed manufacturing costs total $575,000 per year. Variable overhead costs are $2 per direct labor-hour.
All of the company’s nonmanufacturing costs are fixed.
The company’s finished goods inventory is negligible and can be ignored.
Required:
1. How many direct labor hours are used to manufacture one unit of each of the company’s five products?
2. How much variable overhead cost is incurred to manufacture one unit of each of the company’s five products?
3. What is the contribution margin per direct labor-hour for each of the company’s five products?
4. Assuming that direct labor-hours is the company’s constraining resource, what is the highest total contribution margin that the company can earn if it makes optimal use of its constrained resource?
5. Assuming that the company has made optimal use of its 100,400 direct labor-hours, what is the highest direct labor rate per hour that Walton Toy Company would be willing to pay for additional capacity (that is, for added direct labor time)?
Req 1: Computation of Direct Labour Hours require per Unit | |||||
Debbie | Trish | Sarah | Mike | Sewing kit | |
Direct labour cost (a) | 4 | 1 | 7 | 5 | 0.5 |
labour rate per hour (b) | 10 | 10 | 10 | 10 | 10 |
Hours required per unit (a/b) | 0.4 | 0.1 | 0.7 | 0.5 | 0.05 |
Req 2: Computation of Variable OH Cost incurred to manufacture one Unit | |||||
Debbie | Trish | Sarah | Mike | Sewing kit | |
Direct labour cost | 4 | 1 | 7 | 5 | 0.5 |
labor rate per hour | 10 | 10 | 10 | 10 | 10 |
Hours required per unit (a) | 0.4 | 0.1 | 0.7 | 0.5 | 0.05 |
variable Overhead Cost per hour (b) | 2 | 2 | 2 | 2 | 2 |
Variable Cost per unit (axb) | 0.8 | 0.2 | 1.4 | 1 | 0.1 |
Req 3: Computation of Contribution Margin per DLH | |||||
Debbie | Trish | Sarah | Mike | Sewing kit | |
Selling Price per unit(a) | 41 | 4.5 | 30.5 | 15 | 9.9 |
Less: Variable cost | |||||
Material | 4.6 | 1.5 | 9.29 | 3.9 | 5.1 |
labour | 4 | 1 | 7 | 5 | 0.5 |
Variable Oh | 0.8 | 0.2 | 1.4 | 1 | 0.1 |
Total Variable Cost (b) | 9.4 | 2.7 | 17.69 | 9.9 | 5.7 |
Contribution margin per unit (c=a-b) | 31.6 | 1.8 | 12.81 | 5.1 | 4.2 |
Labour hour per unit (d) | 0.40 | 0.10 | 0.70 | 0.50 | 0.05 |
Contribution margin per hour (c/d) | 79.00 | 18.00 | 18.30 | 10.20 | 84.00 |
Ranking | II | IV | III | V | I |
Req 4: | |||
Total labour hourrs available | 100400 | ||
Less: Utilized as per ranking | |||
Sewing Kit (0.05X 344000) | 17200 | ||
Debbie (0.40X 69000) | 27600 | ||
Sarah (0.70X 54000) | 37800 | ||
Trish (0.1X 61000) | 6100 | ||
Hours available for mike | 11700 | ||
Computation of Contribution earned: | |||
Product | Hour Utilized | CM per hour | Total contribution |
Debbie | 27,600 | 79.00 | 21,80,400 |
Trish | 6,100 | 18.00 | 1,09,800 |
Sarah | 37,800 | 18.30 | 6,91,740 |
Mike | 11,700 | 10.20 | 1,19,340 |
Sewing kit | 17,200 | 84.00 | 14,44,800 |
45,46,080 |
Req 5: | ||||||
Additional hours will be utilized in Mike production. Therefore,, management is ready to pay additional amount upto contribution per hour earned from Mike. | ||||||
Maximum rate per hour: | ||||||
Existing rate:- $10 | ||||||
Contribution margin per hr for Mike : $10.20 | ||||||
Maximum rate per hour: ($10+$10.20)= $20.20 |
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 an...
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: Product Demand Next year (units) Selling Price per Unit Direct Materials Direct Labor Debbie 66,000 $ 37.00 $ 4.30 $ 3.50 Trish 58,000 $ 5.00 $ 1.20 $ 0.84 Sarah 51,000 $ 35.50 $ 8.84...
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: Product Demand Next year (units) Selling Price per Unit Direct Materials Direct Labor Debbie 66,000 $ 37.00 $ 4.30 $ 3.50 Trish 58,000 $ 5.00 $ 1.20 $ 0.84 Sarah 51,000 $ 35.50 $ 8.84...
The Walton Toy Company manufactures a line of dolls and a sewing kit. Demand for the company's products is increasing. ement 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 Mike Sewing kit Demand Selling Next year Price (units) per Unit 69, eee $ 41.00 61,00 $ 4.50 54, eee $38.50 46,800 $15.00 344,200 $ 9.90 Direct Materials $4.60 $1.50 59.29 $9.29...
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: Product Demand Next year (units) Selling Price per Unit Direct Materials Direct Labor Debbie 72,000 $ 18.00 $ 4.90 $ 4.05 Trish 64,000 $ 6.50 $ 1.80 $ 1.89 Sarah 57,000 $ 30.00 $ 9.74...
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: Product Demand Next year (units) Selling Price per Unit Direct Materials Direct Labor Debbie 54,000 $ 23.00 $ 4.70 $ 5.40 Trish 46,000 $ 5.00 $ 1.50 $ 1.80 Sarah 39,000 $ 30.00 $ 7.04...
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: Product Demand Next year (units) Selling Price per Unit Direct Materials Direct Labor Debbie 63,000 $ 21.00 $ 5.60 $ 4.20 Trish 55,000 $ 7.50 $ 2.40 $ 1.44 Sarah 48,000 $ 36.50 $ 8.39...
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: Product Demand Next year (units) Selling Price per Unit Direct Materials Direct Labor Debbie 50,000 $ 16.70 $ 4.30 $ 6.40 Trish 42,000 $ 7.50 $ 1.10 $ 4.00 Sarah 35,000 $ 26.60 $ 6.44...
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: Product Demand Next year (units) Selling Price per Unit Direct Materials Direct Labor Debbie 57,000 $ 23.00 $ 5.00 $ 1.50 Trish 49,000 $ 7.00 $ 1.80 $ 0.60 Sarah 42,000 $ 41.00 $ 7.49...
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: Product Demand Next year (units) Selling Price per Unit Direct Materials Direct Labor Debbie 75,000 $ 28.00 $ 5.20 $ 4.80 Trish 67,000 $ 5.70 $ 2.10 $ 1.36 Sarah 60,000 $ 33.50 $ 10.19...
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: Product Demand Next year (units) Selling Price per Unit Direct Materials Direct Labor Debbie 70,000 $ 38.00 $ 4.70 $ 3.50 Trish 62,000 $ 4.60 $ 1.60 $ 1.00 Sarah 55,000 $ 31.00 $ 9.44...