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 Next year Selling Price Direct Direct Labor Product (units) Debbie Trish Sarah Mike Sewing kit 52,000 44,000 37,000 40,800 327,000 per Unit 17.00 $6.50 $26.00 12.00 $8.20 Materials $4.50 $1.30 $6.74 $2.20 $3.40 $2.80 $1.40 $4.90 $3.50 $1.05 The following additional information is available a. The company's plant has a capacity of 114,750 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 $7 per hour is expected to remain unchanged during the coming year c. Fixed costs total S540,000 per year. Variable overhead costs are $4 per direct labor-hour d. All of the company's nonmanufacturing costs are fixed 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.) Contribution Product Margin per DLH Debbie Trish Sarah Mike Sewing kit

Explanation / Answer

Answer 1. Calculation of Contribution Margin per Direct Labor Hour Debbie Trish Sarah Mike Sewing Kit SP Per Unit                 17.00              6.50             26.00             12.00                8.20 Less: Variable Costs Direct Materials                   4.50              1.30               6.74               2.20                3.40 Direct Labor                   2.80              1.40               4.90               3.50                1.05 Variable Overhead                   1.60              0.80               2.80               2.00                0.60 Total Variable Costs                   8.90              3.50             14.44               7.70                5.05 Contribution per Unit                   8.10              3.00             11.56               4.30                3.15 Labour Hrs Req. Per Unit                   0.40              0.20               0.70               0.50                0.15 Cont. Per Lab. Hr                 20.25           15.00             16.51               8.60             21.00 Rank II IV III V I Debbie Trish Sarah Mike Sewing Kit Direct Labor                   2.80              1.40               4.90               3.50                1.05 Labour Hrs. required Per Unit (Direct Lab. Cost / $7)                   0.40              0.20               0.70               0.50                0.15 Answer 2. Total direct Labor Hours Required to Produce Units Estimated Debbie Trish Sarah Mike Sewing Kit Total Units Estimated              52,000         44,000           37,000           40,800         327,000 Labour Hrs Req. Per Unit                   0.40              0.20               0.70               0.50                0.15 Total lab. Hrs. Required              20,800           8,800           25,900           20,400           49,050               124,950 Answer 3 & 4. Quantity Unit Contribution Margin Labor Hrs. required per unit Total Labor Hrs Balance of Labor Hrs Total Conbtribution Total hours available         114,750 Sewing Kit            327,000              3.15               0.15           49,050           65,700           1,030,050 Debbie              40,800              8.10               0.40           16,320           49,380               330,480 Sarah              37,000           11.56               0.70           25,900           23,480               427,720 Trish              44,000              3.00               0.20             8,800           14,680               132,000 Mike              29,360              4.30               0.50           14,680                    -                 126,248 Total Contribution Margin           2,046,498 Answer 5. Aditional Hrs Required - Mike - 11,440 Units X 0.50 Hrs                 5,720 Additional Contribution Mike - 11,440 Units X $4.30              49,020 Labor Cost - Mike              40,040 Total              89,060 Highest price per lab. Hr.                 15.57

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