The Walton Toy Company manufactures four dolls and a sewing kit. It provided the following data for next year:ProductDemand Next year (units)Selling Price per UnitDirect MaterialsDirect LaborDebbie59,000$ 30.00$ 5.20$ 2.10Trish51,000$ 7.00$ 2.00$ 0.70Sarah44,000$ 42.00$ 7.79$ 4.20Mike54,500$ 12.00$ 2.90$ 2.80Sewing kit334,000$ 8.90$ 4.10$ 0.35The following additional information is available:The company’s plant has a capacity of 76,800 direct labor-hours per year on a single-shift basis. Each employee and piece of equipment are capable of making all five products.Next year’s direct labor pay rate will be $7 per hour.Fixed manufacturing costs total $610,000 per year. Variable overhead costs are $4 per direct labor-hour.All of the company’s nonmanufacturing costs are fixed.The company’s finished goods inventory is negligible and can be ignored.Required:How many direct labor-hours are used to manufacture one unit of each of the company’s five products?How much variable overhead cost is incurred to manufacture one unit of each of the company’s five products?What is the contribution margin per direct labor-hour for each of the company’s five products?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?Assuming next year the company makes optimal use of its 76,800 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)?

The contribution margin gives information about the percentage of sales revenue that goes toward paying fixed expenses and, eventually, making a profit. A higher contribution margin suggests that more of every dollar in sales can go toward paying fixed costs and, consequently, profit. Computation of the direct labor-hours are used to manufacture one unitComputation of the contribution margin per direct labor-hour Contribution of the highest total contribution marginComputation of the highest direct labor rate per hour

Answered: e Walton Toy Company manufactures four…

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter2: Basic Cost Management Concepts

Section: Chapter Questions

Problem 35P: Orman Company produces neon-colored covers for tablets (e.g., iPads). For last year, Orman reported...

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Product	Demand Next year (units)	Selling Price per Unit	Direct Materials	Direct Labor
Debbie	59,000	$ 30.00	$ 5.20	$ 2.10
Trish	51,000	$ 7.00	$ 2.00	$ 0.70
Sarah	44,000	$ 42.00	$ 7.79	$ 4.20
Mike	54,500	$ 12.00	$ 2.90	$ 2.80
Sewing kit	334,000	$ 8.90	$ 4.10	$ 0.35

Required:

How many direct labor-hours are used to manufacture one unit of each of the company’s five products?
How much variable overhead cost is incurred to manufacture one unit of each of the company’s five products?
What is the contribution margin per direct labor-hour for each of the company’s five products?
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?
Assuming next year the company makes optimal use of its 76,800 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)?

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e Walton Toy Company manufactures four dolls and a sewing kit. It provided the following data for next year: Product Demand Next year (units) Selling Price per Unit Direct Materials Direct Labor Debbie 59,000 $ 30.00 $ 5.20 $ 2.10 Trish 51,000 $ 7.00 $ 2.00 $ 0.70 Sarah 44

Required: