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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:

  1. 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.
  2. The direct labour rate is $15 per hour; this rate is expected to remain unchanged during the coming year.
  3. Fixed manufacturing costs amount to $710,000 per year. Variable overhead costs are $5 per direct labour-hour.
  4. 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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