FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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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 (please see attachment):
The following additional information is available:
-
The company’s plant has a capacity of 137,510 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 $8 per hour is expected to remain unchanged during the coming year.
-
Fixed
manufacturing costs total $550,000 per year. Variableoverhead costs are $2 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 137,510 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)?
Thank you!
Transcribed Image Text:Selling
Next year Price
(units) per Unit
$19.00
S 7.00
29.00
$13.00
$ 8.30
Demand
Direct
Direct
Product
Materials
Labor
Debbie
$4.60
$1.40
$6.89
$2.30
$3.50
4.40
$ 1.76
6.80
5.20
1.36
53,000
45,000
38,000
32,000
328,000
Trish
Sarah
Mike
Sewing kit
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