The Brandilyn Toy Company manufactures a line of dolls and a doll dress sewing k

Question

The Brandilyn 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 the best sales and production mix for the coming year. The company has provided the following data:

The company’s plant has a capacity of 103,650 direct labor-hours per year on a single-shift basis. The company’s present employees and equipment can produce all five products.

The company’s finished goods inventory is negligible and can be ignored.

What is the highest price, in terms of a rate per hour, that Brandilyn Toy Company should be willing to pay for additional capacity (that is, for added direct labor time)? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

The Brandilyn 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 the best sales and production mix for the coming year. The company has provided the following data:

Explanation / Answer

Marcy Tina Cari Lenny Sewing kit Direct labour cost per unit (a) $5.40 $2.40 $8.40 $5.40 $1.20 Direct labour-hours per unit (c = a/$12) 0.45 0.20 0.70 0.45 0.10 Selling price $35.00 $21.00 $23.00 $19.00 $14.00 Variable costs: Direct materials $3.20 $1.50 $4.00 $2.50 $1.20 Direct labour $5.40 $2.40 $8.40 $5.40 $1.20 Variable overhead $1.80 $0.80 $2.80 $1.80 $0.40 Total variable costs $10.40 $4.70 $15.20 $9.70 $2.80 Contribution margin $24.60 $16.30 $7.80 $9.30 $11.20 Contribution margin per DLH $54.67 $81.50 $11.14 $20.67 $112.00 Product DLH per unit EstimatedSales(units) Total DLHs Marcy 0.45           31,000      13,950 Tina 0.20           47,000        9,400 Cari 0.70           42,000      29,400 Lenny 0.45           36,000      16,200 Sewing kit 0.10        4,80,000      48,000    1,16,950 Excess      13,300 Because the Cari doll has the lowest contribution margin per labor hour, its production should be reduced by 19,000 dolls, (13,300/0.70 DLH per Doll), Thus the production and sales of the Cari will be reduced to 23,000 dolls per year Since the additional capacity would be used to produce the Tiger, the company should be willing to pay up to $23.14 per DLH ($12.00 usual labour rate plus $11.14 contribution margin per DLH) for added labour time

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