he Walton Toy Company manufactures a line of dolls and a sewing kit. Demand for the company’s 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 73,000 $ 25.00 $ 5.00 $ 3.50 Trish 65,000 $ 6.00 $ 1.90 $ 1.05 Sarah 58,000 $ 32.50 $ 9.89 $ 5.60 Mike 37,000 $ 16.00 $ 4.30 $ 4.20 Sewing kit 348,000 $ 10.30 $ 5.50 $ 0.70 The following additional information is available: The company’s plant has a capacity of 138,550 direct labor-hours per year on a single-shift basis. The company’s present employees and equipment can produce all five products. The direct labor rate of $7 per hour is expected to remain unchanged during the coming year. Fixed manufacturing costs total $615,000 per year. Variable overhead costs are $2 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. Assuming that direct labor-hours is the company’s constraining resource, what is the highest total contribution margin that the company can earn if it makes optimal use of its constrained resourc
The Walton Toy Company manufactures a line of dolls and a sewing kit. Demand for the company’s 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 | 73,000 | $ 25.00 | $ 5.00 | $ 3.50 |
| Trish | 65,000 | $ 6.00 | $ 1.90 | $ 1.05 |
| Sarah | 58,000 | $ 32.50 | $ 9.89 | $ 5.60 |
| Mike | 37,000 | $ 16.00 | $ 4.30 | $ 4.20 |
| Sewing kit | 348,000 | $ 10.30 | $ 5.50 | $ 0.70 |
The following additional information is available:
-
The company’s plant has a capacity of 138,550 direct labor-hours per year on a single-shift basis. The company’s present employees and equipment can produce all five products.
-
The direct labor rate of $7 per hour is expected to remain unchanged during the coming year.
-
Fixed
manufacturing costs total $615,000 per year. Variable overhead costs are $2 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.
Assuming that direct labor-hours is the company’s constraining resource, what is the highest total contribution margin that the company can earn if it makes optimal use of its constrained resource?
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