Volume Trade-off Decisions LO13-5,LO13-6 The Walton Toy Company manufactures four dolls and a sewing kit. It provided the following data for next year: Product Debbie Trish Sarah Mike Sewing kit Demand Next Year (units) 50,000 42,000 35,000 40,000 325,000 Selling Price per Unit $16.70 $7.50 $26.60 $14.00 $9.60 Direct Materials $4.30 $1.10 $6.44 $2.00 $3.20 Page 602 d. All of the company's nonmanufacturing costs are fixed. e. The company's finished goods inventory is negligible and can be ignored. Direct Labor $6.40 $4.00 $11.20 $8.00 $3.20 The following additional information is available: a. The company's plant has a capacity of 130,000 direct labor-hours per year on a single-shift basis. Each employee and piece of equipment are capable of making all five products. b. Next year's direct labor pay rate will be $16 per hour. c. Fixed costs total $520,000 per year. Variable overhead costs are $2 per direct labor-hour.

PROBLEM 13-27 Volume Trade-off Decisions LO13-5, LO13-6 The Walton Toy Company manufactures four dolls and a sewing kit. It provided the following data for next year: The following additional information is available: a. The company's plant has a capacity of 130,000 direct labor-hours per year on a single-shift basis. Each employee and piece of equipment are capable of making all five products. b. Next year's direct labor pay rate will be $16 per hour. c. Fixed costs total $520,000 per year. Variable overhead costs are $2 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. 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 direct labor-hours is the company's constraining resource, what is the highest total contribution margin the company can earn next year if it makes optimal use of its constrained resource? 5. Assuming next year the company makes optimal use of its 130,000 direct labor-hours, what is the highest direct labor rate per hour Walton Toy Company should be willing to pay for additional capacity (that is, for added direct labor time)? 6. Identify changes the company could make to enable it to satisfy the customers' demand for all of its products