Problem 13-25 (Algo) Volume Trade-Off Decisions [LO13-5, LO13-6] The Wbton Toy Company manufactures a sine of dolls and a sewing kit. Demend for the compary's products is increasing, and managentent requests assistance from you in determining an economical saies and production mix for the coming yeat. The campany hos provided the following data: The following adcitional information is available: a. The company's piant has a copocity of 164,990 direct labor-hours per year on a single-shift basis. The compiny's present employess and equipment can produce all five products. b. The direct iabor rate of $8 per hour is expected to remain unchanged during the coming year. c. Fixed manufacturing costs total $635,000 per year. Variable overhead costs are $4 per direct labor-hour. d. Alr of the company's nonnanufacturing 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 manufocture one unit of each of the company's flve products? 2. How much varlable overhead cost is incurred to manufacture one unit of each of the company's flve 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 contrlbution 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 164.990 direct iabor-hours, what is the highest direct labor rate per hour that Waiton Toy Company would be willing to pay for additional capacity (that is, for added direct labor time)? Problem 13-20 (Algo) Sell or Process Further Decision [LO13-7] (Propared from a situation suggested by Professor John W. Hardy) Lone Star Meat Packers is a major processor of beef and other meat products. The company has a large amount of T-bone steak on hand, and it is trying to decide whether to sell the T-bone steaks as they are initially cut or to process them further into filet mignon and the New York cut. If the T-bone steaks are sold as initially cut, the company figures that a 1-pound T-bone steak would yield the following profit: If the company were to further process the T-bone steaks, then cutting one side of a T-bone steak provides the filet mignon and cutting the other side provides the New York cut. One 16-ounce T-bone steak cut in this way will yield one 6 -ounce filet mignon and one 8-ounce New York cut; the remaining ounces are waste. It costs $0.14 to further process one T-bone steak into the filet mignon and New York cuts. The filet mignon can be sold for $4.40 per pound, and the New York cut can be sold for $2.90 per pound. Required: What is the financial advantage (disadvantage) of further processing one T-bone steak into filet mignon and New York cut steaks? Would you recommend that the T-bone steaks be sold as initially cut or processed further? The Waiton 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: The following additional information is available: a. The company's plant has a capacity of 164,990 direct labor-hours per year on a single-shift basis. The compeny'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. Fixed manufacturing costs total $635,000 per year. Variable overhead costs are $4 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 164,990 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)? Problem 13-20 (Algo) Sell or Process Further Decision [LO13-7] (Prepared from a situation suggested by Professor John W. Hardy.) Lone Star Meat Packers is a major processor of beef and other meat products. The company has a large amount of T-bone steak on hand, and it is trying to decide whether to sell the T-bone steaks as they are initially cut or to process them further into filet mignon and the New York cut. If the T-bone steaks are sold as initially cut, the company figures that a 1-pound T-bone steak would yield the following profit: If the company were to further process the T-bone steaks, then cutting one side of a T-bone steak provides the filet mignon and cutting the other side provides the New York cut. One 16-ounce T-bone steak cut in this.way will yieid one 6 -ounce fllet mignon and one 8-ounce New York cut; the remaining ounces are waste. It costs $0.14 to further process one T-bone steak into the filet mignon and New York cuts. The filet mignon can be sold for $4.40 per pound, and the New York cut can be sold for $2.90 per pound. Required: 1. What is the financial advantage (disadvantage) of further processing one T-bone steak into filet mignon and New York cut steaks? 2. Would you recommend that the T-bone steaks be sold as initially cut or processed further