Chad Davis, vice president for operations at C&C Sports, is considering different strategies for managing the company's inventory. Earlier in the year, the company implemented a more systematic production schedule so that at the end of each month Finished Goods Inventory is 25% of the next month's anticipated sales. That strategy freed a lot of inventory space and improved the company's cash flow. However, Chad noticed that because of the seasonal nature of the purchases of all of the products, especially award jackets, the need for direct labor hours fluctuated widely from one month to the next. Even though Chad is able to hire workers as needed, he is concerned that eventually he won't be able to find skilled workers unless they are promised a more consistent schedule. For C&C Sports, labor and sewing machines are constrained resources. The company can produce as many of their products as they have people to make them. Chad gathered the following unit sales and cost information about each product. Pants Jerseys Jackets $19.00 $22.00 $175.00 Sales price Direct materials $6.00 $10.00 $58.00 Direct labor 4.00 3.20 24.00 Variable overhead 2.20 1.76 13.20 Fixed overhead 2.80 2.24 16.80 Total cost $15.00 $17.20 $112.00 Gross profit $4.00 $4.80 $63.00 Direct labor hours .25 .20 1.50 D E H K M 1 2 2. EXHIBIT 5.5 C&C Sports' sales forecast. B F N C&C Sports Sales Forecast 2021 3 4 Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec Annual 5 Baseball pants 38,000 20,000 12,000 12,000 12,000 16,000 8,000 6,000 6,000 10,000 20,000 40,000 200,000 6 Baseball jerseys 12,000 5,000 4,000 6,000 3,000 2,000 2,000 2,000 4,000 6,000 15,000 70,000 7 Award jackets 0 0 0 1,000 5,000 3,000 0 0 0 1,000 5,000 3,000 18,000 9,000 A B E 1 C&C Sports 2021 4th Quarter Direct Labor Budget - All Products EXHIBIT 5.13 C&C Sports' direct labor budget- all products. 2 3 3 4 5 Baseball pants (Exhibit 5-12) 6 Baseball jerseys 7 Award jackets 8 Total direct labor hours required 9 Standard average wage rate 10 Budgeted direct labor cost October November December 4th Quarter 3,125 6,250 9,875 19,250 900 1,650 2,850 5,400 3,000 6,750 3,375 13,125 7,025 14,650 16,100 37,775 $ 16.00 $ 16.00 $ 16.00 $ 16.00 $ 112,400 $ 234,400 $ 257,600 $ 504,400 Flows to budgeted COGS in ending inventory budget Flows to cash budget Claire Elliot, vice president for finance and administration, reminded him that a commission of 5% of the sales price and shipping costs of $0.40 per item should also be considered when analyzing different strategies. Assume that the sales team is able to increase jersey sales to 73,500 per year. What is the impact on total contribution margin if jerseys are made instead of pants? Assume that the number of DLH remains the same as in the initial scenario. (Round answer to nearest whole numbers, e.g. 15.) Net increase of $ in contribution margin. What is the impact on total contribution margin if jerseys are made instead jackets? Assume that the number of DLH remains the same as in the initial scenario. (Round answer to nearest whole numbers, e.g. 15.) Net decrease of $ 12600 in contribution margin