The Montrose Toy Company manufactures a line of dolls and a doll dress sewing ki

Question

The Montrose 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 156,800 direct labor-hours per year on a single-shift basis. The company’s present employees and equipment can produce all five products.

Determine the contribution margin per direct labor-hour expended on each product. (Round your final answers to 2 decimal places.)

       

Calculate 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.)

     

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

   

The Montrose 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

1)

Working

Computation of Variable cost per unit

2)

Total direct labor-hours that will be required to produce the units estimated to be sold during the coming year = 174193.75 Hour

4)

The company’s plant has a capacity of 156,800 direct labor-hours per year on a single-shift basis

Direct labor Hour Shortage = 174193.75 - 156800

Direct labor Hour Shortage = 17393.75 Hour

From Available capacity Produce  Marcy,TINA, Leny & Sweing Kit in full demand and Produce remaining Direct Hour for product Cari i.e (156800-148140.625)/0.5125 = 16896 Units

Highest price, in terms of a rate per hour, that Montrose Toy Company should be willing to pay for additional capacity = Direct labor rate + Contribution Margin per DLH of Cari

Highest price, in terms of a rate per hour, that Montrose Toy Company should be willing to pay for additional capacity = 16 + 13.76

Highest price, in terms of a rate per hour, that Montrose Toy Company should be willing to pay for additional capacity = $ 29.76

Answer

$ 29.76

Product   Marcy   Tina   Cari   Lenny   Sewing kit Selling Price per Unit [a] 37 30 27 24 23 Variable Cost Direct Materials [b]      3.79000      2.90000      5.50000      3.90000         2.40000 Direct Labor [c]      5.20000      4.10000    10.50000      8.20000         3.70000 Variable overhead [d]      0.97500      0.76875      1.96875      1.53750         0.69375 Total Variable cost [e = b+c+d]      9.96500      7.76875    17.96875    13.63750         6.79375 Contribution Margin [f = a-e]    27.03500    22.23125      9.03125    10.36250      16.20625 Direct Labor Hour Required per Unit [g]      0.32500      0.25625      0.65625      0.51250         0.23125 Contribution Margin per DLH [h = f/g           83.18           86.76           13.76           20.22             70.08

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