The Walton Toy Company manufactures a line of dolls and a sewing kit. Demand for

Question

The Walton Toy Company manufactures a line of dolls and a sewing kit. Demand for the company's products 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 Selling Price Direct Direct (units) per Unit Materials Labor 1.50 $ 0.60 3.00 $ 2.00 $0.35 year Product Debbie Trish Sarah Mike Sewing kit 57,000 $23.00 49,000 $ 7.00 42,000 $41.00 45,500 $10.00 $5.00 $1.80 $7.49 $2.70 $3.90 332,000 8.70 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 manufacturing costs total $590,000 per year. Variable overhead costs are $2 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. How many direct labor hours are used to manufacture one unit of each of the company's five products? 2. How much variable overhead cost is incurred to manufacture one unit of each of the company's five products?

Explanation / Answer

1) Direct Labor hours required   

2) Variable Overhead cost per unit

3) Calculation of contribution margin per hour (Amount in $)

4) If the direct labor hours is the company's constraining resource then contribution per labor hour is used for ranking of products, then optimal production is decided based on the ranking.

Highest total contribution margin = $3,884,202

5) As the additional labor hours are required for the production of mike, the highest direct labor rate per hour should be equal to contribution margin per hour from sale of mike (i.e.$11.25)

Particulars Debbie Trish Sarah Mike Sewing Kit Direct labor cost per unit (i) $1.50 $0.60 $3.00 $2.00 $0.35 Labor rate per hour (ii) $5 $5 $5 $5 $5 Direct Labor hour per unit [(i)/(ii)] 0.30 0.12 0.60 0.40 0.07

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.