The Walton Toy Company manufactures a line of dolls and a doll dress sewing kit. Demand for the dolls 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:The following additional information is available: 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 8 per hour is expected to remain unchanged during the coming year. c. Fixed 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.
(b) Prepare a schedule showing the total direct labor-hours that will be required to produce the units estimated to be sold during the coming year.

Respuesta :

Requirement 1 and Requirement 2:

                                             Debbie Trish Sarah Mike Sewing Kit

Direct Labor Cost             (a) $4.40 $1.76 $6.80 $5.20 $1.36

Labor Cost per hour               (b) $8 $8 $8 $8 $8

Required 1 Direct labor hour used ( c) = (a/b) 0.55 0.22 0.85 0.65 0.17

Variable Overhead cost per hour (d) $2 $2 $2 $2 $2

Required 2 Variable Overhead cost ( e) = (c x d) $1.10 $0.44 $1.70 $1.30 $0.34

Requirement 3:

Particulars Debbie Trish Sarah Mike Sewing Kit

Selling Price Per Unit $19.00 $7.00 $29.00 $13.00 $8.30

Less: Variable Cost

Direct Material Cost $4.60 $1.40 $6.89 $2.30 $3.50

Direct Labor cost $4.40 $1.76 $6.80 $5.20 $1.36

Variable Overhead cost $1.10 $0.44 $1.70 $1.30 $0.34

Contribution Margin (a) $8.90 $3.40 $13.61 $4.20 $3.10

Direct Labor hour used (b) 0.55 0.22 0.85 0.65 0.17

Required 3 Contribution Margin per direct labor hour (a/b) $16.18 $15.45 $16.01 $6.46 $18.24

Ranking 2 4 3 5 1

Requirement 4:

Debbie Trish Sarah Mike Sewing Kit Total

Demand Next Year…..(a) 53,000 45,000 38,000 32,000 328,000

Direct Labor hour used….(b) 0.55 0.22 0.85 0.65 0.17

Total direct labor hour needed…..(c ) = (a x b) 29150 9900 32300 20800 55760 147910

Ranking 2 4 3 5 1

Direct Labor hour used…(g) 29150 9900 32300 10,400 55760 137510

Contribution per direct labor hour..(e ) $16.18 $15.45 $16.01 $6.46 $18.24

Required 4 Total Contribution….(f) = (c x g) $471,647.00 $152,955.00 $517,123.00 $67,184.00 $1,017,062.40 $2,225,971.40

Requirement 5:

Additional Contribution due to additional capacity = (147,910 - 137,510) x $6.46

                                                 = 10,400 x 6.46

                                                 = $67,184

Highest direct labor rate per hour = $8 + $6.46

                                                         = $14.46

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