Question

Problem 7-25 Utilization of a Constrained Resource (LO7-5, LO7-6] 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: 3.92/6.66 points awarded Scored Product Debbie Trish Sarah Mike Sewing kit Demand Next year (units) 62,000 54,000 47,000 56,000 337,000 Selling Price per Unit Materials $20.50 $5.50 $ 7.00 $2.30 $34.00 $8.24 $15.00 $3.20 $ 9.20 $4.40 Direct Labor $3.60 $1.32 $7.20 $4.80 $0.72 The following additional information is available: a. The company's plant has a capacity of 84,160 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 costs total $640,000 per year. Variable overhead costs are $3 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. Determine the contribution margin per direct labor-hour expended on each product. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Contribution Product Debbie DLH 36.00 28.73 28.93 $ $ $ Trish Sarah Mike 15.50 X

Answer 1

Answers Contribution Margin Per DLH Product Contribution Margin Per DLH Debbie 35.00 Trish 27.73 Sarah 27.93 Mike 14.50 Sewing Kit 65.00 Total Hours Product Total Hours Debbie 2 Trish Sarah Mike Sewing Kit 18600 5940 28200 22400 20220 Direct Labour Allocated Direct Labour Product Allocated Debbie 18600 Trish 5940 Sarah 282001 Mike 11200 Sewing Kit 20220 14 Total Contribution Margin Highest Price 3080120 26.50

Product Debbie T Trish Sarah Mike Sewing Kit Demand Selling Price Direct Material | Direct Labor 6 2000 20.5 5.50 3.6 54000 7 2 .300 1.32 47000 34 8.24 7.2 56000 15 3.20 8 4. 337000 9.2 4.400 0.72| Direct Labor Hours Available 84160 Variable Overhead cost Per Unit Direct Labour Hour Rate 12 Contribution Margin 9.40| 3.38 18.56 7 .00 4.08 Clacullations Product Direct Labor Direct Labors Required Variable Overhead Cost Contribution Margin 10.5 3.1 Debbie Trish Sarah Mike Sewing Kit Contribution Margin Per DLH 35.00 27.73 27.93 14.50 65.00 16.8 5.8 0.72 0.06 3.9 Variable Overhead Cost Per Unit = Direct Labor * DL Required * Variable OH Rate Contribution Margin = Selling Price-DM-DL - Varaible OH Contribution Margin Per DLH = Contribution Margin / DL Required Total Direct Labor-Hours Required to Prodcued Direct Labors Product Demand Required Debbie 62000 Trish 54000 0.11 Sarah 47000) Mike 56000 Sewing Kit 3370001 Direct Labour Total Hours Allocated 18600 186001 5940 5940 28200 28200 22400 112001 202201 20220 Total Contribution Margin Contribution Margin 651000 164700 7 87720 162400 1 314300 3080120