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Kuddly Creations Ltd. manufactures a line of stuffed animals. Sales are increasing, and management is concerned that the company may not have sufficient capacity to
Kuddly Creations Ltd. manufactures a line of stuffed animals. Sales are increasing, and management is concerned that the company may not have sufficient capacity to meet the expected demand for the coming year. The following sales and production data are available for planning purposes: Product Selling Price Per Unit Direct Materials Direct Labour Monkey Bear Panda Dog Kangaroo Estimated Demand in units 80.000 105,000 60,000 48,000 200.000 $20.00 12.50 9.00 14.75 8.50 $6.91 4.30 3.90 6.50 4.70 $5.60 3.20 2.40 4.00 1.60 The following additional information is available: 1 a) Because of strong competition, the company feels that it cannot increase its selling prices above those indicated. b) The direct labour rate is $8 per hour; this rate is expected to remain unchanged during the coming year. c) Fixed overhead costs total S640,000 per year. d) Variable overhead costs are equal to 25 percent of direct labour costs. e) The company's plant has a capacity of 140,000 direct labour hours per year. Required: Given the above data, determine how many units of each product should be produced during the coming year
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