4. Assuming that direct labor-hours is the company's constraining resource, what is the highest total contribution margin that thecompany can earn if it makes optimal use of its constrained resource?5. Assuming that the company has made optimal use of its 84,160 direct labor-hours, what is the highest direct labor rate per hour thatWalton Toy Company would be willing to pay for additional capacity (that is, for added direct labor time)? The Walton Toy Company manufactures a line of dolls and a sewing kit. Demand for the company's products is increasing, andmanagement requests assistance from you in determining an economical sales and production mix for the coming year. The companyhas provided the following data:DemandSellingPriceNextyearDirectDirect(units) per Unit Materials$20.50$ 7.00ProductLabor$5.50$2.30$8.24$3.20$4.40$ 3.60$ 1.32$ 7.20$ 4.80$ 0.72Debbie62,00054,00047,00056,000337,000 $ 9.20TrishSarah$34.00Mike$15.00Sewing kitThe following additional information is available:a. The company's plant has a capacity of 84,160 direct labor-hours per year on a single-shift basis. The company's present employeesand equipment can produce all five products.b. The direct labor rate of $12 per hour is expected to remain unchanged during the coming year.c. Fixed manufacturing costs total $640,000 per year. Variable overhead costs are $3 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.

Solution 1: Computation of contribution margin per direct labor-hour Debbie Trish…

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: Demand Selling Price Next Direct Direct Labor $ 3.60 $ 1.32 $ 7.20 $ 4.80 $ 0.72 year (units) per Unit Materials 62,000 $20.50 54,000 $ 7.00 47,000 56,000 337,000 Product Debbie Trish Sarah Mike $5.50 $2.30 $34.00 $15.00 $ 9.20 $8.24 $3.20 $4.40 Sewing kit The following additional information is available: a. The company's plant has a capacity of 84,160 direct labor-hours per year on a single-shift basis. The company's present employees and equipment can produce all five products. b. The direct labor rate of $12 per hour is expected to remain unchanged during the coming year. c. Fixed manufacturing costs total $640,000 per year. Variable overhead costs are $3 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.

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: Demand Selling Price Next Direct Direct Labor $ 3.60 $ 1.32 $ 7.20 $ 4.80 $ 0.72 year (units) per Unit Materials 62,000 $20.50 54,000 $ 7.00 47,000 56,000 337,000 Product Debbie Trish Sarah Mike $5.50 $2.30 $34.00 $15.00 $ 9.20 $8.24 $3.20 $4.40 Sewing kit The following additional information is available: a. The company's plant has a capacity of 84,160 direct labor-hours per year on a single-shift basis. The company's present employees and equipment can produce all five products. b. The direct labor rate of $12 per hour is expected to remain unchanged during the coming year. c. Fixed manufacturing costs total $640,000 per year. Variable overhead costs are $3 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.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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