Question
Soft and Cuddly Friends (SCF) produces soft dolls. Demand for the dolls is increasing, and management wants you to identify an economical sales and production
Soft and Cuddly Friends (SCF) produces soft dolls. Demand for the dolls is increasing, and management wants you to identify an economical sales and production mix for the coming year. The following information is available:
Softy
Friendly
Goody
Besty
Lovey
Demand (units)
73,000
61,200
51,100
58,400
104,200
Price per unit
$
27.50
$
12.50
$
43.50
$
21.50
$
17.50
Variable costs:
Direct materials
12.25
4.25
17.60
6.50
9.50
Direct labour
6.00
3.75
10.50
7.50
3.00
The following additional information is available:
- 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 five products.
- The direct labour rate is $15 per hour; this rate is expected to remain unchanged during the coming year.
- Fixed manufacturing costs amount to $710,000 per year. Variable overhead costs are $5 per direct labour-hour.
- All of the company's sales and administrative costs are fixed.
1. How many total direct labour-hours will be required to produce the units estimated to be sold during the coming year? Show your computations. (Round your answers to 2 decimal places.)
DLH Per Unit
Softy
Friendly
Goody
Besty
Lovey
2.Keeping in mind the direct labour-hour capacity, what should be the company's product mix for the upcoming year? Do schedule in support of your recommendation.(Round "Per Unit" to 2 decimal places.)
Product
Softy
Friendly
Goody
Besty
Lovey
Total hours required
Direct Labour-Hour Per Unit
_____________hours
_____________hours
_____________hours
_____________hours
_____________hours
Estimated Sales (Units)
______________
______________
______________
______________
______________
Total Hours
______________
______________
______________
______________
______________
______________
3.What is the highest price, in terms of a rate per hour, that SCF would be willing to pay for additional capacity (i.e., for added direct labour time)?
Highest price per hour _____________
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