QUESTION 2 (13 marks) PLEASE PROVIDE THE FORMULAS Davison 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 data are available for planning purposes: Product Sabre Tooth Tiger Polar Bear Blue Sharks Estimated Demand Next Direct Year Selling Price Materials Direct Labour 80,000 $20.00 $6.91 $5.60 105,000 12.50 4.30 3.20 60,000 9.00 3.90 2.40 The following additional information is available: 1 With the strong competition, the company feels that it can't increase its selling prices above those indicated 2 The direct labour rate is $8 per hour, this rate is expected to remain unchanged during the coming year 3 Fixed manufacturing costs total $640,000 per year. Variable manufacturing overhead costs are equal to 25% of direct labour costs. 4 The company's plant has a capacity of 110,000 direct labour-hours per year on a single-shift Question #1 Question #1 SOLUTION Question #2 Question #2 SOLUTION The following additional information is available: 1 With the strong competition, the company feels that it can't increase its selling prices above those indicated 2 The direct labour rate is $8 per hour, this rate is expected to remain unchanged during the coming year. 3 Fixed manufacturing costs total $640,000 per year. Variable manufacturing overhead costs are equal to 25% of direct labour costs. 4 The company's plant has a capacity of 110,000 direct labour-hours per year on a single-shift basis. The company's present employees and equipment can produce all three products. 5 The company's current inventory of finished products is nominal and can be ignored. 6 All of the other company's nonmanufacturing costs are fixed. REQUIRED: a. How many units of the sabre toothed tiger, polar bear and blue sharks can be produced based on the constraint? (9 marks) b. What is the total contribution margin for the company based on your calculations in a? (4 marks) Question # Question #1 SOLUTION Question 72 Question #2 SOLUTION