Question
Jones Co, produces 3 dolls. Each doll has hair that is made of a special filament that is only available from one supplier. The filament
Jones Co, produces 3 dolls. Each doll has hair that is made of a special filament that is only available from one supplier. The filament sells for $4 per gram.
Tom wears a soccer uniform.
Sheila is in a wedding dress and requires some hand sewing.
Godiva has long hair.
The budgeted selling price and costs for the 3 dolls are listed below:
Tom | Sheila | Godiva | |
Selling price............. | $25 | $40 | $35 |
Direct labor.............. | $5 | $10 | $5 |
Plastic (body)........... | $3 | $4 | $4 |
Fabric (clothes)........ | $2 | $3 | $0 |
Hair......................... | $2 | $4 | $10 |
Variable overhead... | $1 | $2 | $1 |
Fixed overhead....... | $4 | $8 | $4 |
Total cost............... | $17 | $31 | $24 |
Profit per doll.......... | $8 | $9 | $11 |
The fixed overhead costs are all common fixed costs that are simply allocated among the product lines. The fixed cost per unit above assumed production and sales of 3,000 Toms, 3,000 Sheilas, and 4,000 Godivas.
Assume there is unlimited demand for all three products. Jones plans to produce 10,000 dolls.
Assuming that there are no constraints on any of the production resources, which doll should be produced to maximize net income for Jones Co.?
a. | Tom | |
b. | Sheila | |
c. | Godiva |
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