Divine Electronics Ltd. manufactures a line of headphones. 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 Estimated Demand Next Year Selling Price Direct Materials Direct Labour 1 Wire 78,000 $25.00 $7.30 $5.00 2 Wire 75,000 20.00 10.20 3.20 3 Wire 115,000 17.50 2.80 5.00 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 $10 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 the 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 1 Wire, 2 Wire and 3 Wire can be produced based on the constraint? b. What is the total contribution margin for the company baed on your calculation in (a) ?
Divine Electronics Ltd. manufactures a line of headphones. 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 |
Estimated Demand Next Year |
Selling Price |
Direct Materials |
Direct Labour |
|
|
1 Wire |
78,000 |
$25.00 |
$7.30 |
$5.00 |
|
|
2 Wire |
75,000 |
20.00 |
10.20 |
3.20 |
|
|
3 Wire |
115,000 |
17.50 |
2.80 |
5.00 |
|
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 $10 per hour; this rate is expected to remain unchanged during the coming year.
3. Fixed
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 1 Wire, 2 Wire and 3 Wire can be produced based on the constraint?
b. What is the total contribution margin for the company baed on your calculation in (a) ?
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