Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

/Users/bridgetstemm/Desktop/Screen Shot 2018-04-14 at 5.41.22 PM.png The Walton Toy Company manufactures a line of dolls and a sewing kit. Demand for the companys products is

/Users/bridgetstemm/Desktop/Screen Shot 2018-04-14 at 5.41.22 PM.png

The Walton Toy Company manufactures a line of dolls and a sewing kit. Demand for the companys 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:

Product Demand Next year (units) Selling Price per Unit Direct Materials Direct Labor
Debbie 50,000 $ 16.70 $ 4.30 $ 6.40
Trish 42,000 $ 7.50 $ 1.10 $ 4.00
Sarah 35,000 $ 26.60 $ 6.44 $ 11.20
Mike 40,000 $ 14.00 $ 2.00 $ 8.00
Sewing kit 325,000 $ 9.60 $ 3.20 $ 3.20

The following additional information is available:

The companys plant has a capacity of 130,000 direct labor-hours per year on a single-shift basis. The companys present employees and equipment can produce all five products.

The direct labor rate of $16 per hour is expected to remain unchanged during the coming year.

Fixed manufacturing costs total $520,000 per year. Variable overhead costs are $2 per direct labor-hour.

All of the companys nonmanufacturing costs are fixed.

The companys 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 companys five products?

2. How much variable overhead cost is incurred to manufacture one unit of each of the companys five products?

3. What is the contribution margin per direct labor-hour for each of the companys five products?

4. Assuming that direct labor-hours is the companys 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 130,000 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)?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

The Customer Support Audit

Authors: Colin G. Armistead

1st Edition

190776609X, 978-1907766091

More Books

Students also viewed these Accounting questions

Question

c. What were you expected to do when you grew up?

Answered: 1 week ago