The Walton Toy Company manufactures a line of dolls and a doll dress sewing kit.

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 Demand Selling Next year Price Direct Direct Product Debbie Trish Sarah Mike (units) per Unit Materials Labor 57,000 $23.00 $5.00 $1.50 49,000 $ 7.00 $1.80 $0.60 42,000 $41.00 $7.49 $3.00 45,500 $10.00 $2.70 $2.00 332,000 Sewing kit $8.70 $3.90 $0.35 The following additional information is available a. The company's plant has a capacity of 80,520 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 $5 per hour is expected to remain unchanged during the coming year. c. Fixed costs total $590,000 per year. Variable overhead costs are $2 per direct labor- hour d. All of the company's nonmanufacturing costs are fixec e. 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.)

Explanation / Answer

Req 1: DEBBIE TRISH SARAH MIKE SEWING KIT Labour cost per unit 1.50 0.60 3.00 2.00 0.35 labour rate perr hour 5.00 5.00 5.00 5.00 5.00 labour horus per unit required 0.30 0.12 0.60 0.40 0.07 Req 2 DEBBIE TRISH SARAH MIKE SEWING KIT Labour cost per unit 1.50 0.60 3.00 2.00 0.35 labour rate perr hour 5.00 5.00 5.00 5.00 5.00 labour horus per unit required 0.30 0.12 0.60 0.40 0.07 Variable OH rate per hour 2.00 2.00 2.00 2.00 2.00 variable cost per unit 0.60 0.24 1.20 0.80 0.14 Req 3: DEBBIE TRISH SARAH MIKE SEWING KIT Selling price 23.00 7.00 41.00 10.00 8.70 Less: variable cost Material 5.00 1.80 7.49 2.70 3.90 Labour 1.50 0.60 3.00 2.00 0.35 Overheads 0.60 0.24 1.20 0.80 0.14 Contribution margin per unt 15.90 4.36 29.31 4.50 4.31 Divide: Labour hrs 0.30 0.12 0.60 0.40 0.07 Contribution mamrgin per hour 53.00 36.33 48.85 11.25 61.57 Ranking II IV III V I Req 4: Total Hours available: 80520.00 Less: Distributed in order of ranking Sewing Kit (332000*0.07) 23240 Debbie (57000*0.30) 17100 Sarah (42000*0.60) 25200 Trish (49000*0.12) 5880 Hours available for Mike 9100 Contribution earned Hrs Contribution per hour Contributuon mrgin Debbie 17100 53 906300 Trish 5880 36.33 213620.4 Sarah 25200 48.85 1231020 Mike 9100 11.25 102375 Sewing kit 23240 61.57 1430887 Total OH 3884202 Req 5: Additional hourrs will be used for production of Mike only. Therfore, the company is ready to pay only additional ccontribution margin per our of mike. Maximum prie per hour to be paid: Exiting rate 5 Add: Contribution margin per hour of Mike 11.25 Maximum price per hour to be paid: 16.25

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