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Demand for Stuffin Such stuffed animal shells and stuffing/finishing kits manufactured by RoseMarie Limited is increasing, and management requests assistance from you in determining the
Demand for Stuffin Such stuffed animal shells and stuffing/finishing kits manufactured by RoseMarie Limited is increasing, and management requests assistance from you in determining the best sales and production mix for the coming year. The company has provided the following data:
Demand Selling Direct (units) per Unit Materials Labour $1.00 $1.50 $3.50 $5.50 $.50 Next Year Price Direct Product Teddy bear Polar bear Husky Tiger 13,000 8,000 9,000 6,000 $30 $32 $25 $27 $12 $5.10 $3.90 $3.10 $3.70 $2.10 Stuffing/finishing kits 27,000 The following additional information is available: a. The company's plant has a capacity of 9,750 direct labour-hours per year on a single-shift basis. The company's current employees and equipment can produce all five products b. The direct labour rate of $10.00 per hour is expected to remain unchanged during the coming year. c. Fixed costs total $160,000 per year. Variable overhead costs are $3.00 per direct labour-hour. d. All of the company's non-manufacturing costs are fixed. e. The company's finished goods inventory is negligible and can be ignored. Required: 1. Determine the contribution margin per direct labour-hour expended on each product (the profitability index). (Do not round intermediate calculations. Round your answers to 2 decimal places.) Contribution Margin per DLH Product Teddy Polar Husky Tiger Stuffing/finishing KitStep by Step Solution
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