Question
In: Accounting
The Walton Toy Company manufactures a line of dolls and a sewing kit. Demand for the...
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:
| Product | Demand Next year (units) |
Selling Price per Unit |
Direct Materials |
Direct Labor |
|||
| Debbie | 55,000 | $ | 27.00 | $ | 4.80 | $ | 5.00 |
| Trish | 47,000 | $ | 6.00 | $ | 1.60 | $ | 1.50 |
| Sarah | 40,000 | $ | 40.00 | $ | 7.19 | $ | 8.00 |
| Mike | 35,000 | $ | 15.00 | $ | 2.50 | $ | 6.00 |
| Sewing kit | 330,000 | $ | 8.50 | $ | 3.70 | $ | 1.00 |
The following additional information is available:
-
The company’s plant has a capacity of 110,050 direct labor-hours per year on a single-shift basis. The company’s present employees and equipment can produce all five products.
-
The direct labor rate of $10 per hour is expected to remain unchanged during the coming year.
-
Fixed manufacturing costs total $570,000 per year. Variable overhead costs are $4 per direct labor-hour.
-
All of the company’s nonmanufacturing costs are fixed.
-
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?
3. What is the contribution margin per direct labor-hour for each of the company’s five products?
4. Assuming that direct labor-hours is the company’s constraining resource, what is the highest total contribution margin that the company can earn if it makes optimal use of its constrained resource?
5. Assuming that the company has made optimal use of its 110,050 direct labor-hours, what is the highest direct labor rate per hour that Walton Toy Company would be willing to pay for additional capacity (that is, for added direct labor time)?
Solutions
Expert Solution
| 1 | Debbie | Trish | Sarah | Mike | Sewing Kit | ||||
| Direct labor cost | a | 5 | 1.5 | 8 | 6 | 1 | |||
| Direct labor rate per hour | b | 10 | 10 | 10 | 10 | 10 | |||
| Direct labor hours per unit | a/b | 0.5 | 0.15 | 0.8 | 0.6 | 0.1 | |||
| 2 | Debbie | Trish | Sarah | Mike | Sewing Kit | ||||
| Direct labor hours per unit | a | 0.5 | 0.15 | 0.8 | 0.6 | 0.1 | |||
| Variable overhead costs per hour | b | 4 | 4 | 4 | 4 | 4 | |||
| Variable overhead costs | a*b | 2 | 0.6 | 3.2 | 2.4 | 0.4 | |||
| 3 | Contribution margin per direct labor hour: | ||||||||
| Debbie | Trish | Sarah | Mike | Sewing Kit | |||||
| Selling price per unit | 27 | 6 | 40 | 15 | 8.5 | ||||
| Less: Variable expenses | |||||||||
| Direct materials | 4.8 | 1.6 | 7.19 | 2.5 | 3.7 | ||||
| Direct labor | 5 | 1.5 | 8 | 6 | 1 | ||||
| Variable overhead costs | 2 | 0.6 | 3.2 | 2.4 | 0.4 | ||||
| Total variable expenses | 11.8 | 3.7 | 18.39 | 10.9 | 5.1 | ||||
| Contribution margin per unit | a | 15.2 | 2.3 | 21.61 | 4.1 | 3.4 | |||
| Direct labor hours per unit | b | 0.5 | 0.15 | 0.8 | 0.6 | 0.1 | |||
| Contribution margin per direct labor hour | a/b | 30.4 | 15.33 | 27.01 | 6.83 | 34 | |||
| 4 | Debbie | Trish | Sarah | Mike | Sewing Kit | ||||
| Contribution margin per direct labor hour | 30.4 | 15.33 | 27.01 | 6.83 | 34 | ||||
| Rank | 2 | 4 | 3 | 5 | 1 | ||||
| Total labor hours required=110050 | |||||||||
| First preference should be given to Sewing Kit | |||||||||
| Sewing kit production=330000 units | |||||||||
| Labor hours required for sewing kit=0.1 | |||||||||
| Total labor hours used=330000*0.1=33000 hours | |||||||||
| Balance hours available=110050-33000=77050 hours | |||||||||
| Second preference should be given to Debbie | |||||||||
| Debbie production=55000 units | |||||||||
| Labor hours required for debbie=0.5 | |||||||||
| Total labor hours used=55000*0.5=27500 hours | |||||||||
| Balance hours available=77050-27500=49550 hours | |||||||||
| Third preference should be given to Sarah | |||||||||
| Sarah production=40000 units | |||||||||
| Labor hours required for Sarah=0.8 | |||||||||
| Total labor hours used=40000*0.8=32000 hours |
 ekkarill92 answered 2 years agoRelated SolutionsThe Walton Toy Company manufactures a line of dolls and a sewing kit. Demand for the...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:
Product
Demand
Next year
(units)
Selling
Price
per Unit
Direct
Materials
Direct
Labor
Debbie
67,000
$
30.00
$
4.40
$
4.40
Trish
59,000
$
5.40
$
1.30
$
0.80
Sarah
52,000
$
44.00
$
8.99...
The Walton Toy Company manufactures a line of dolls and a sewing kit. Demand for the...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:
Product
Demand
Next year
(units)
Selling
Price
per Unit
Direct
Materials
Direct
Labor
Debbie
74,000
$
25.50
$
5.10
$
3.85
Trish
66,000
$
5.20
$
2.00
$
1.12
Sarah
59,000
$
33.00
$
10.04...
The Walton Toy Company manufactures a line of dolls and a sewing kit. Demand for the...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:
Product
Demand
Next year
(units)
Selling
Price
per Unit
Direct
Materials
Direct
Labor
Debbie
50,000
$
16.70
$
4.30
$
6.40
Trish
42,000
$
7.50
$
1.10
$
4.00
Sarah
35,000
$
26.60
$
6.44...
The Walton Toy Company manufactures a line of dolls and a sewing kit. Demand for the...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:
Product
Demand
Next year
(units)
Selling
Price
per Unit
Direct
Materials
Direct
Labor
Debbie
65,000
$
28.00
$
4.20
$
4.05
Trish
57,000
$
6.00
$
1.10
$
1.26
Sarah
50,000
$
35.00
$
8.69...
The Walton Toy Company manufactures a line of dolls and a sewing kit. Demand for the...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:
Product
Demand
Next year
(units)
Selling
Price
per Unit
Direct
Materials
Direct
Labor
Debbie
57,000
$
23.00
$
5.00
$
1.50
Trish
49,000
$
7.00
$
1.80
$
0.60
Sarah
42,000
$
41.00
$
7.49...
The Walton Toy Company manufactures a line of dolls and a sewing kit. Demand for the...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:
Product
Demand
Next year
(units)
Selling
Price
per Unit
Direct
Materials
Direct
Labor
Debbie
70,000
$
38.00
$
4.70
$
3.50
Trish
62,000
$
4.60
$
1.60
$
1.00
Sarah
55,000
$
31.00
$
9.44...
The Walton Toy Company manufactures a line of dolls and a sewing kit. Demand for the...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:
Product
Demand
Next year
(units)
Selling
Price
per Unit
Direct
Materials
Direct
Labor
Debbie
50,000
$
16.70
$
4.30
$
6.40
Trish
42,000
$
7.50
$
1.10
$
4.00
Sarah
35,000
$
26.60
$
6.44...
The Walton Toy Company manufactures a line of dolls and a sewing kit. Demand for the...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:
Product
Demand
Next year
(units)
Selling
Price
per Unit
Direct
Materials
Direct
Labor
Debbie
63,000
$
21.00
$
5.60
$
4.20
Trish
55,000
$
7.50
$
2.40
$
1.44
Sarah
48,000
$
36.50
$
8.39...
The Walton Toy Company manufactures a line of dolls and a sewing kit. Demand for the...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:
Product
Demand
Next year
(units)
Selling
Price
per Unit
Direct
Materials
Direct
Labor
Debbie
67,000
$
30.00
$
4.40
$
4.40
Trish
59,000
$
5.40
$
1.30
$
0.80
Sarah
52,000
$
44.00
$
8.99...
The Walton Toy Company manufactures a line of dolls and a sewing kit. Demand for the...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:
Product
Demand
Next year
(units)
Selling
Price
per Unit
Direct
Materials
Direct
Labor
Debbie
59,000
$
30.00
$
5.20
$
2.10
Trish
51,000
$
7.00
$
2.00
$
0.70
Sarah
44,000
$
42.00
$
7.79...
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