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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: Product Demand Next Selling Price year (units) per Unit $ 16.70 Debbie Trish $ 7.50 Sarah 35,000 $ 26.60 Mike 40,000 $ 14.00 Sewing kit 325,000 $ 9.60 The following additional information is available: 50,000 42,000 Direct Materials $ 4.30 $ 1.10 $ 6.44 $ 2.00 $ 3.20 Direct Labor $ 6.40 $ 4.00 $ 11.20 $ 8.00 $ 3.20 a. The company's plant has a capacity of 130,000 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 $16 per hour is expected to remain unchanged during the coming year. c. Fixed manufacturing costs total $520,000 per year. Variable overhead costs are $2 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?

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 Selling Price year (units) per Unit $ 16.70 Debbie Trish $ 7.50 Sarah 35,000 $ 26.60 Mike 40,000 $ 14.00 Sewing kit 325,000 $ 9.60 The following additional information is available: 50,000 42,000 Direct Materials $ 4.30 $ 1.10 $ 6.44 $ 2.00 $ 3.20 Direct Labor $ 6.40 $ 4.00 $ 11.20 $ 8.00 $ 3.20 a. The company's plant has a capacity of 130,000 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 $16 per hour is expected to remain unchanged during the coming year. c. Fixed manufacturing costs total $520,000 per year. Variable overhead costs are $2 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?

FINANCIAL ACCOUNTING
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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**Walton Toy Company: Economical Sales and Production Mix Analysis** **Overview:** The Walton Toy Company manufactures a line of dolls and a sewing kit. With increasing product demand, the company seeks assistance in determining an optimal sales and production mix for the coming year. The provided data includes both demand forecasts and cost specifics for five products. ### Provided Data: | Product | Demand Next Year (units) | Selling Price per Unit | Direct Materials | Direct Labor | |------------|---------------------------|------------------------|------------------|--------------| | Debbie | 50,000 | $16.70 | $4.30 | $6.40 | | Trish | 42,000 | $7.50 | $1.10 | $4.00 | | Sarah | 35,000 | $26.60 | $6.44 | $11.20 | | Mike | 40,000 | $14.00 | $2.00 | $8.00 | | Sewing kit | 325,000 | $9.60 | $3.20 | $3.20 | ### Additional Information: a. The company's plant capacity is 130,000 direct labor-hours per year on a single-shift basis, with existing employees and equipment able to produce all five products. b. The direct labor rate is $16 per hour and is anticipated to remain the same for the next year. c. Fixed manufacturing costs total $520,000 per year. Variable overhead costs are $2 per direct labor-hour. d. Nonmanufacturing costs are fixed. e. The finished goods inventory is negligible and can be ignored. ### Required Analysis: 1. **Direct Labor Hours per Unit:** - Determine how many direct labor hours are used to manufacture one unit of each product. 2. **Variable Overhead Cost per Unit:** - Calculate the variable overhead cost incurred for manufacturing one unit of each product. 3. **Contribution Margin per Direct Labor Hour:** - Assess the contribution margin per direct labor-hour for each product. 4. **Highest Total Contribution Margin:** - Assuming direct labor hours are the constraint, determine the highest total contribution margin possible with optimal utilization of the 130,000 direct labor-hours. 5. **Additional Capacity Compensation:** - Assess the highest direct labor rate per hour that
Transcribed Image Text:**Walton Toy Company: Economical Sales and Production Mix Analysis** **Overview:** The Walton Toy Company manufactures a line of dolls and a sewing kit. With increasing product demand, the company seeks assistance in determining an optimal sales and production mix for the coming year. The provided data includes both demand forecasts and cost specifics for five products. ### Provided Data: | Product | Demand Next Year (units) | Selling Price per Unit | Direct Materials | Direct Labor | |------------|---------------------------|------------------------|------------------|--------------| | Debbie | 50,000 | $16.70 | $4.30 | $6.40 | | Trish | 42,000 | $7.50 | $1.10 | $4.00 | | Sarah | 35,000 | $26.60 | $6.44 | $11.20 | | Mike | 40,000 | $14.00 | $2.00 | $8.00 | | Sewing kit | 325,000 | $9.60 | $3.20 | $3.20 | ### Additional Information: a. The company's plant capacity is 130,000 direct labor-hours per year on a single-shift basis, with existing employees and equipment able to produce all five products. b. The direct labor rate is $16 per hour and is anticipated to remain the same for the next year. c. Fixed manufacturing costs total $520,000 per year. Variable overhead costs are $2 per direct labor-hour. d. Nonmanufacturing costs are fixed. e. The finished goods inventory is negligible and can be ignored. ### Required Analysis: 1. **Direct Labor Hours per Unit:** - Determine how many direct labor hours are used to manufacture one unit of each product. 2. **Variable Overhead Cost per Unit:** - Calculate the variable overhead cost incurred for manufacturing one unit of each product. 3. **Contribution Margin per Direct Labor Hour:** - Assess the contribution margin per direct labor-hour for each product. 4. **Highest Total Contribution Margin:** - Assuming direct labor hours are the constraint, determine the highest total contribution margin possible with optimal utilization of the 130,000 direct labor-hours. 5. **Additional Capacity Compensation:** - Assess the highest direct labor rate per hour that
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