The Walton Toy Company manufactures four dolls and a sewing kit. It provided the following data for next year: Product Demand Next year (units) Selling Price per Unit Direct Materials Direct Labor Debbie 59,000 $ 30.00 $ 5.20 $ 2.10 Trish 51,000 $ 7.00 $ 2.00 $ 0.70 Sarah 44,000 $42.00 $ 7.79 $ 4.20 Mike 54,500 $ 12.00 $ 2.90 $ 2.80 Sewing kit 334,000 $ 8.90 $ 4.10 $ 0.35 The following additional information is available: The company's plant has a capacity of 76,800 direct labor - hours per year on a single-shift basis. Each employee and piece of equipment are capable of making all five products. Next year's direct labor pay rate will be $7 per hour. Fixed manufacturing costs total $610,000 per year. Variable overhead costs are $4 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. Required: How many direct labor-hours are used to manufacture one unit of each of the company's five products? How much variable overhead cost is incurred to manufacture one unit of each of the company's five products? What is the contribution margin per direct labor - hour for each of the company's five products? Assuming direct labor-hours is the company's constraining resource, what is the highest total contribution margin the company can earn next year if it makes optimal use of its constrained resource? Assuming next year the company makes optimal use of its 76,800 direct labor - hours, what is the highest direct labor rate per hour Walton Toy Company should be willing to pay for additional capacity (that is, for added direct labor time)?
The Walton Toy Company manufactures four dolls and a sewing kit. It provided the following data for next year: Product Demand Next year (units) Selling Price per Unit Direct Materials Direct Labor Debbie 59,000 $ 30.00 $ 5.20 $ 2.10 Trish 51,000 $ 7.00 $ 2.00 $ 0.70 Sarah 44,000 $42.00 $ 7.79 $ 4.20 Mike 54,500 $ 12.00 $ 2.90 $ 2.80 Sewing kit 334,000 $ 8.90 $ 4.10 $ 0.35 The following additional information is available: The company's plant has a capacity of 76,800 direct labor - hours per year on a single-shift basis. Each employee and piece of equipment are capable of making all five products. Next year's direct labor pay rate will be $7 per hour. Fixed manufacturing costs total $610,000 per year. Variable overhead costs are $4 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. Required: How many direct labor-hours are used to manufacture one unit of each of the company's five products? How much variable overhead cost is incurred to manufacture one unit of each of the company's five products? What is the contribution margin per direct labor - hour for each of the company's five products? Assuming direct labor-hours is the company's constraining resource, what is the highest total contribution margin the company can earn next year if it makes optimal use of its constrained resource? Assuming next year the company makes optimal use of its 76,800 direct labor - hours, what is the highest direct labor rate per hour Walton Toy Company should be willing to pay for additional capacity (that is, for added direct labor time)?
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter16: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 2CE
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Transcribed Image Text:The Walton Toy Company manufactures four dolls and a sewing kit. It provided the following data for next year:
Product Demand Next year (units) Selling Price per Unit Direct Materials Direct Labor
Debbie 59,000 $ 30.00 $ 5.20 $ 2.10
Trish 51,000 $ 7.00 $ 2.00 $ 0.70
Sarah 44,000 $42.00 $ 7.79 $ 4.20
Mike 54,500 $ 12.00 $ 2.90 $ 2.80
Sewing kit 334,000 $ 8.90 $ 4.10 $ 0.35
The following additional information is available:
The company's plant has a capacity of 76,800 direct labor - hours per year on a single-shift basis. Each employee and piece of
equipment are capable of making all five products.
Next year's direct labor pay rate will be $7 per hour.
Fixed manufacturing costs total $610,000 per year. Variable overhead costs are $4 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.
Required:
How many direct labor-hours are used to manufacture one unit of each of the company's five products?
How much variable overhead cost is incurred to manufacture one unit of each of the company's five products?
What is the contribution margin per direct labor - hour for each of the company's five products?
Assuming direct labor-hours is the company's constraining resource, what is the highest total contribution margin the company can
earn next year if it makes optimal use of its constrained resource?
Assuming next year the company makes optimal use of its 76,800 direct labor - hours, what is the highest direct labor rate per hour
Walton Toy Company should be willing to pay for additional capacity (that is, for added direct labor time)?
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