Soft and Cuddly Friends (SCF) produces soft dolls. Demand for the dolls is increasing, and management wants you to identify an economical sales and production mix for the coming year. The following information is available:

The following additional information is available:

a. The company?s plant has a capacity of 100,000 direct labour-hours per year on a single-shift basis. The company?s present employees and equipment can produce all five products.

b. The direct labour rate is $12 per hour; this rate is expected to remain unchanged during the coming year.

c. Fixed manufacturing costs amount to $680,000 per year. Variable overhead costs are $4 per direct labour-hour.

d. All of the company?s sales and administrative costs are fixed.

Required:

1. How many total direct labour-hours will be required to produce the units estimated to be sold during the coming year? Show your computations.

2. Keeping in mind the direct labour-hour capacity, what should be the company?s product mix for the upcoming year? Prepare a schedule in support of your recommendation.

3. What is the highest price, in terms of a rate per hour, that SCF would be willing to pay for additional capacity (i.e., for added direct labour time)?

4. Assume again that the company does not want to reduce sales of any product. Identify ways the company could obtain the additional output.

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Friendly Softy Goody Besty Lovey Demand (units) 70,000 49,000 58,800 56,000 100,000 Price per unit $ 16.00 $ 26.00 $ 11.00 $ 42.00 $ 20.00 Variable costs: Direct materials 10.75 2.75 16.10 5.00 8.00 Direct labour 2.40 4.80 3.00 8.40 6.00