The Walton Toy Company manufactures four dolls and a sewing kit. It provided the following data for next year: Product Demand Next year (units) Selling Price per Unit Direct Materials Direct Labor Debbie 52,000 $ 17.00 $ 4.50 $ 2.80 Trish 44,000 $ 6.50 $ 1.30 $ 1.40 Sarah 37,000 $ 26.00 $ 6.74 $ 4.90 Mike 40,800 $ 12.00 $ 2.20 $ 3.50 Sewing kit 327,000 $ 8.20 $ 3.40 $ 1.05 The following additional information is available: The company’s plant has a capacity of 114,750 direct labor-hours per year on a single-shift basis. Each employee and piece of equipment are capable of making all five products. Next year’s direct labor pay rate will be $7 per hour. Fixed manufacturing costs total $540,000 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. How many direct labor-hours are used to manufacture one unit of each of the company’s five products? How much variable overhead cost is incurred to manufacture one unit of each of the company’s five products? What is the contribution margin per direct labor-hour for each of the company’s five products? I ONLY NEED THESE TWO QUESTIONS ANSWERED Assuming direct labor-hours is the company’s constraining resource, what is the highest total contribution margin the company can earn next year if it makes optimal use of its constrained resource? Assuming next year the company makes optimal use of its 114,750 direct labor-hours, what is the highest direct labor rate per hour Walton Toy Company should be willing to pay for additional capacity (that is, for added direct labor time)?

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter2: Basic Cost Management Concepts

Section: Chapter Questions

Problem 21E: Ellerson Company provided the following information for the last calendar year: During the year,...

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The Walton Toy Company manufactures four dolls and a sewing kit. It provided the following data for next year:

Product	Demand Next year (units)	Selling Price per Unit	Direct Materials	Direct Labor
Debbie	52,000	$ 17.00	$ 4.50	$ 2.80
Trish	44,000	$ 6.50	$ 1.30	$ 1.40
Sarah	37,000	$ 26.00	$ 6.74	$ 4.90
Mike	40,800	$ 12.00	$ 2.20	$ 3.50
Sewing kit	327,000	$ 8.20	$ 3.40	$ 1.05

The following additional information is available:

The company’s plant has a capacity of 114,750 direct labor-hours per year on a single-shift basis. Each employee and piece of equipment are capable of making all five products.
Next year’s direct labor pay rate will be $7 per hour.
Fixed manufacturing costs total $540,000 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.

How many direct labor-hours are used to manufacture one unit of each of the company’s five products?

How much variable overhead cost is incurred to manufacture one unit of each of the company’s five products?

What is the contribution margin per direct labor-hour for each of the company’s five products?

I ONLY NEED THESE TWO QUESTIONS ANSWERED

Assuming direct labor-hours is the company’s constraining resource, what is the highest total contribution margin the company can earn next year if it makes optimal use of its constrained resource?
Assuming next year the company makes optimal use of its 114,750 direct labor-hours, what is the highest direct labor rate per hour Walton Toy Company should be willing to pay for additional capacity (that is, for added direct labor time)?

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