Theory of constraints, contribution margin, sensitivity analysis. Low Tech ‘Toys (LY)

ie Rak: produces dolls in two processes: moulding and assembly. LTT is currently producing two pee eee canbe models: Chatty Chelsey and Talking Tanya. Production in the Moulding Department is limerent STG ited by the amount of materials available. Production in the Assembly Department is limited by the amount of trained labour available. The only variable costs are materials in the Moulding Department and labour in the Assembly Department. Following are the requirements and limitations by doll model and department.

REQUIRED 1. If LIT sold only one type of doll, which doll would it produce? How many of these dolls would it make and sell?
2. If LIT sells two Chatty Chelseys for each Talking Tanya, how many dolls of each type would it produce and sell? What would be the total contribution margin?
3. If LIT sells two Chatty Chelseys for each Talking Tanya, how much would production and contribution margin increase if the Moulding Department could buy 10 more kilograms of materials for $10 per kilogram?
4. If LY'T sells two Chatty Chelseys for each Talking Tanya, how much would production and contribution margin increase if the Assembly Department could get 10 more labourhours at $12 per hour?LO1

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Chatty Chelsey Talking Tanya Materials/Labour Available Cost Moulding Materials 1.5 kg per doll 2 kg per doll 30,000 kg $10 per kg Assembly Time 20 minutes per doll 30 minutes per doll 8,400 hours $12 per hour Selling Price $35 per doll $45 per doll