Question

Soft and Cuddly Friends (SCF) produces soft dolls. Demand for the dolls is increasing, and management wants you to identify an economical sales and production mix for the coming year. The following information is available: Softy 84,000 $ 45.00 Friendly 70,000 38.00 Goody 58,800 35.00 Besty 67,200 23.00 Lovey 119,600 31.00 $ $ $ $ Demand (units) Price per unit Variable costs: Direct materials Direct labour 4.50 7.60 3.70 4.75 7.10 13.30 5.30 9.50 3.30 3.80 The following additional information is available: a. The company's plant has a capacity of 120,000 direct labour-hours per year on a single-shift basis. The company's present employees and equipment can produce all five products. b. The direct labour rate is $19 per hour, this rate is expected to remain unchanged during the coming year. c. Fixed manufacturing costs amount to $820,000 per year. Variable overhead costs are $6 per direct labour-hour. d. All of the company's sales and administrative costs are fixed. Required: 1. How many total direct labour-hours will be required to produce the units estimated to be sold during the coming year? Show your computations. (Round your answers to 2 decimal places.) DLH Per Unit Softy Friendly Goody Besty Lovey

Answer 1

Answer 1

	DLH per unit
Softy	0.40
Friendly	0.25
Goody	0.70
Besty	0.50
Lovely	0.20

Calculations:

	DLH per unit
Softy	=$ 7.6/19
Friendly	=$ 4.75/19
Goody	=$ 13.3/19
Besty	=$ 9.5/19
Lovely	=$ 3.8/19

Answer 2

	DLH per unit	Estimated sales	Total Hours
Softy	0.40	84,000	33,600
Friendly	0.25	70,000	17,500
Goody	0.70	58,800	41,160
Besty	0.50	7,640	3,820
Lovely	0.20	119,600	23,920
			120,000

Calculations:

	Softy	Friendly	Goody	Besty	Lovely
Selling Price	$ 45.00	$   38.00	$ 35.00	$ 23.00	$   31.00
Less: material	$   4.50	$     3.70	$   7.10	$   5.30	$     3.30
Less: Labor	$   7.60	$     4.75	$ 13.30	$   9.50	$     3.80
Contribution	$ 32.90	$   29.55	$ 14.60	$   8.20	$   23.90
DLH per unit	0.40	0.25	0.70	0.50	0.20
Contribution per hour	$ 82.25	$ 118.20	$ 20.86	$ 16.40	$ 119.50
Rank	III	II	IV	V	I

Answer 3

Highest price per hour = $ 16.40

Explanation:

It is equal to Contribution per hour of Besty good.

In case of any doubt, please comment.