Chapter 13 Canvas Homework - SHOW YOUR WORK FOR CREDIT Resource Constraint -Volume Trade-Off Decisions. The Walton Toy Company manufactures a line of dolls and a sewing kit. Demand for the company's products is increasing, and management requests assistance from you in determining an economical sales and production mix for the coming year. The company has provided the following data: Price per Product Debble Trish Sarah Mike Sewing Kit Demand Selling next year Direct Direct (units) Unit Materials Labor 71,000 $ 17.50 $ 4.80 $ 3.20 63,000 $ 6.00 $ 1.70 $ 1.60 56,000 $ 31.50 $ 9.59 $ 5.60 47,600 $ 13.00 $ 4.10 $ 4.00 346,000 $10,10 $ 5.30 $ 1.20 The following additional information is available: a. The compariy's plant has a capacity of 144,000 direct labor-hours per year on a single-shift basis. The company's present employees and equipment can produce all five products. b. The direct labor rate of $8 per hour is expected to remain unchanged during the coming year. c Fored manufacturing costs total $595,000 per year, Variable overhead costs are $3 per direct labor-hour. d. All of the company's nonmanufacturing costs are fixed. e. The company's finished goods inventory is negligible and can be ignored. Required: 1. How many direct labor hours are used to manufacture one unit of each of the company's five products? 2. How much variable overhead cost is incurred to manufacture one unit of each of the company's five products? 3. What is the contribution margin per direct labor-hour for each of the company's five products 4. Assuming that direct labor-hours is the company's constraining resource, what is the highest total contribution margin that the company can earn if it makes optimal use of its constrained resource? 5. Assuming that the company has made optimal use of its 144,000 direct labor-hours, what is the highest direct labor rate per hour that Walton Toy Company would be willing to pay for additional capacity (that is for added direct labor time)? Hints A Requirements 1, 2 & 3: These first 3 requirements are tailor made for Excel. You will need to use Excel in Chapter 14. If you do not use this program, now a good time to start B. Requirement 4: You only have 144.000 DLHs to expand. You cannot use more. Also, do not plan to produce any more of a product than you can sell. Thus, the process to use is 1. Start with the product yielding the highest CM per DLH Produce that product until you run out of DLHS or you have produced as many as you can sel 2. Go to the product with the next highest CM per DEH 35 Continue this process until you run out of DLHs or marketable product you will run out of DLHS) 4. Through this process, you will determine how many of each product to produce AND the maximum CM possible from these products. This is the optimal product mix C Requirement 5: The maximum price a company will be willing to pay for one more unit of a constrained resource is the regular price it pays for that resource PLUS the CM per unit of the resource attached to the last product it will produce Please enter your answers in this table. Show your work below. Requirement 2 Requirement 3 Requirement1 DLHs per Unit Product VMOH per Unit CM per DLH Debbie Trish Sarah Mike Sewing Kit
