Chad Davis, vice president for operations at C&C Sports, is considering different strategies for managing the companys 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 months anticipated sales. That strategy freed a lot of inventory space and improved the companys 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 wont 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.

$12.00 2 Sales price Direct materials Direct labor Variable overhead Fixed overhead Total cost Gross profit Direct labor hours Pants $12.00 $4.47 .40 1.32 1.68 $9.87 $2.13 .25 Jerseys $14.80 $6.85 1.92 1.05 1.35 $11.17 $3.63 Jackets $125.00 $44.72 14.40 7 .92 10.08 $77.12 $47.88 Jan 38,000 12,000 0 Baseball pants Baseball jerseys Award jackets Feb Mar 20,000 12,000 9,000 5,000 0 0 C&C SPORTS Sales Forecast for 2017 Apr May June July Aug Sep Oct Nov Dec Annual 12,000 12,000 16,000 8,000 6,000 6,000 10,000 20,000 40,000 200,000 4,000 6,000 3,000 2,000 2,000 2,000 4,000 6,000 15,000 70,000 1,000 5,000 3,000 0 0 0 1,000 5,000 3,000 18,000 C&C SPORTS 4th Quarter Direct Labor Budget-All Products October November December 4th Quarter Baseball pants (Exhibit 5-12) 3,125 6,250 9,875 19,250 Baseball jerseys 900 1,650 2,850 5,400 Award jackets 3,000 3,000 3,000 9,000 Total direct labor hours 7,025 10,900 15,725 33,650 required Standard average $ 9.60 $ 9.60 $ 9.60 $ 9.60 wage rate Total direct labor cost $67,440 $104,640 $150,960 $323,040 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. (a) Your answer is correct. Calculate the contribution margin per unit for each product. (Round answers to 2 decimal places, e.g. 52.75.) Contribution margin 2.81 Pants 3.84 Jerseys 51.31 Jackets Click if you would like to Show Work for this question: Open Show Work SHOW SOLUTION LINK TO TEXT LINK TO VIDEO (b) Your answer is correct. Calculate the contribution margin per direct labor hour for each product. (Round answers to 2 decimal places, e.g. 52.75.) Contribution margin Pants SL 11.24 19.2 Jerseys IV Jackets sl 34.21 Click if you would like to Show Work for this question: Open Show Work (C) Your answer is correct. If demand wasn't an issue, what preference order should be given to producing each of the products? 1. Jackets 2. Jerseys 3. Pants Click if you would like to Show Work for this question: Open Show Work LINK TO TEXT LINK TO VIDEO (di) Your answer is correct. If the sales mix continues as budgeted in 2017200,000 pants, 70,000 jerseys, and 18,000 jackets-how many direct labor hours will be needed to produce these units? Direct labor hours Pants 5000 DLH 50000 T 14000 DIH Jerseys 27000 Jackets LH 91000) DLH Click if you would like to Show Work for this question: Open Show Work (f) 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.) of s 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.) of s in contribution margin. Click if you would like to Show Work for this question: Open Show Work $12.00 2 Sales price Direct materials Direct labor Variable overhead Fixed overhead Total cost Gross profit Direct labor hours Pants $12.00 $4.47 .40 1.32 1.68 $9.87 $2.13 .25 Jerseys $14.80 $6.85 1.92 1.05 1.35 $11.17 $3.63 Jackets $125.00 $44.72 14.40 7 .92 10.08 $77.12 $47.88 Jan 38,000 12,000 0 Baseball pants Baseball jerseys Award jackets Feb Mar 20,000 12,000 9,000 5,000 0 0 C&C SPORTS Sales Forecast for 2017 Apr May June July Aug Sep Oct Nov Dec Annual 12,000 12,000 16,000 8,000 6,000 6,000 10,000 20,000 40,000 200,000 4,000 6,000 3,000 2,000 2,000 2,000 4,000 6,000 15,000 70,000 1,000 5,000 3,000 0 0 0 1,000 5,000 3,000 18,000 C&C SPORTS 4th Quarter Direct Labor Budget-All Products October November December 4th Quarter Baseball pants (Exhibit 5-12) 3,125 6,250 9,875 19,250 Baseball jerseys 900 1,650 2,850 5,400 Award jackets 3,000 3,000 3,000 9,000 Total direct labor hours 7,025 10,900 15,725 33,650 required Standard average $ 9.60 $ 9.60 $ 9.60 $ 9.60 wage rate Total direct labor cost $67,440 $104,640 $150,960 $323,040 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. (a) Your answer is correct. Calculate the contribution margin per unit for each product. (Round answers to 2 decimal places, e.g. 52.75.) Contribution margin 2.81 Pants 3.84 Jerseys 51.31 Jackets Click if you would like to Show Work for this question: Open Show Work SHOW SOLUTION LINK TO TEXT LINK TO VIDEO (b) Your answer is correct. Calculate the contribution margin per direct labor hour for each product. (Round answers to 2 decimal places, e.g. 52.75.) Contribution margin Pants SL 11.24 19.2 Jerseys IV Jackets sl 34.21 Click if you would like to Show Work for this question: Open Show Work (C) Your answer is correct. If demand wasn't an issue, what preference order should be given to producing each of the products? 1. Jackets 2. Jerseys 3. Pants Click if you would like to Show Work for this question: Open Show Work LINK TO TEXT LINK TO VIDEO (di) Your answer is correct. If the sales mix continues as budgeted in 2017200,000 pants, 70,000 jerseys, and 18,000 jackets-how many direct labor hours will be needed to produce these units? Direct labor hours Pants 5000 DLH 50000 T 14000 DIH Jerseys 27000 Jackets LH 91000) DLH Click if you would like to Show Work for this question: Open Show Work (f) 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.) of s 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.) of s in contribution margin. Click if you would like to Show Work for this question: Open Show Work