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 compar has provided the following data: Selling Demand Next Price per year (units) 64,000 56,000 49,000 45,600 339,000 Direct Product Unit Materials Direct Labor $ 22.00 $ 8.00 $ 38.50 $ 13.00 $ 9.40 $ 4.10 $ 2.50 $ 8.54 $ 3.40 $ 4.60 $ 3.20 $ 1.04 $ 5.60 $ 4.00 $ 0.64 Debbie Trish Sarah Mike Sewing kit The following additional information is available: a. The company's plant has a capacity of 105,700 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 $8 per hour is expected to remain unchanged during the coming year. c. Fixed manufacturing costs total $525,000 per year. Variable overhead costs are $5 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. Required: 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 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? 5. Assuming that the company has made optimal use of its 105,700 direct labor-hours, what is the highest direct labor rate per hour that Walton 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, and management requests assistance from you in determining an economical sales and production mix for the coming year. The compar has provided the following data: Selling Demand Next Price per year (units) 64,000 56,000 49,000 45,600 339,000 Direct Product Unit Materials Direct Labor $ 22.00 $ 8.00 $ 38.50 $ 13.00 $ 9.40 $ 4.10 $ 2.50 $ 8.54 $ 3.40 $ 4.60 $ 3.20 $ 1.04 $ 5.60 $ 4.00 $ 0.64 Debbie Trish Sarah Mike Sewing kit The following additional information is available: a. The company's plant has a capacity of 105,700 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 $8 per hour is expected to remain unchanged during the coming year. c. Fixed manufacturing costs total $525,000 per year. Variable overhead costs are $5 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. Required: 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 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? 5. Assuming that the company has made optimal use of its 105,700 direct labor-hours, what is the highest direct labor rate per hour that Walton Toy Company would be willing to pay for additional capacity (that is, for added direct labor time)?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Please only do parts 4 and 5.
Transcribed Image Text: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:
Selling
Price per
Demand Next
Direct
Product
year (units)
64,000
56,000
49,000
Unit
Materials
Direct Labor
$ 22.00
$ 8.00
$ 38.50
$ 13.00
$ 9.40
$ 4.10
$ 2.50
$ 8.54
$ 3.40
$ 4.60
$ 3.20
$ 1.04
$ 5.60
$ 4.00
$ 0.64
Debbie
Trish
Sarah
Mike
45,600
Sewing kit
339,000
The following additional information is available:
a. The company's plant has a capacity of 105,700 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 $8 per hour is expected to remain unchanged during the coming year.
c. Fixed manufacturing costs total $525,000 per year. Variable overhead costs are $5 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.
Required:
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 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?
5. Assuming that the company has made optimal use of its 105,700 direct labor-hours, what is the highest direct labor rate per hour
that Walton Toy Company would be willing to pay for additional capacity (that is, for added direct labor time)?
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