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 Unit $ 21.00 $ 7.50 $36.50 63,000 55,000 48,000 48,000 338,000 $ 16.00 $ 9.30 The following additional information is available: Product Debbie Trish Sarah Mike Sewing kit Demand Next year (units) Direct Materials $ 5.60 $ 2.40 $ 8.39 $ 3.30 $ 4.50 Direct Labor $4.20 $ 1.44 $ 7.80 $ 5.40 $ 0.84 a. The company's plant has a capacity of 94,310 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 $650,000 per year. Variable overhead costs are $4 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 94,310 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 company has provided the following data: Selling Price per Unit $ 21.00 $ 7.50 $36.50 63,000 55,000 48,000 48,000 338,000 $ 16.00 $ 9.30 The following additional information is available: Product Debbie Trish Sarah Mike Sewing kit Demand Next year (units) Direct Materials $ 5.60 $ 2.40 $ 8.39 $ 3.30 $ 4.50 Direct Labor $4.20 $ 1.44 $ 7.80 $ 5.40 $ 0.84 a. The company's plant has a capacity of 94,310 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 $650,000 per year. Variable overhead costs are $4 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 94,310 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
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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 Next
year (units)
63,000
55,000
48,000
48,000
338,000
The following additional information is available:
Product
Selling
Price per
Unit
$ 21.00
$ 7.50
$36.50
$ 16.00
$ 9.30
Debbie
Trish
Sarah
Mike
Sewing kit
Direct
Materials
$5.60
$ 2.40
$ 8.39
$ 3.30
$ 4.50
Direct Labor
$ 4.20
$ 1.44
$ 7.80
$ 5.40
$ 0.84
a. The company's plant has a capacity of 94,310 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 $650,000 per year. Variable overhead costs are $4 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 94,310 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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