The Montrose Toy Company manufactures a line of dolls and a doll dress sewing ki
ID: 2451840 • Letter: T
Question
The Montrose 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 the best sales and production mix for the coming year. The company has provided the following data:
The company’s plant has a capacity of 154,800 direct labor-hours per year on a single-shift basis. The company’s present employees and equipment can produce all five products.
The company’s finished goods inventory is negligible and can be ignored.
Determine the contribution margin per direct labor-hour expended on each product. (Round your final answers to 2 decimal places.)
Calculate the total direct labor-hours that will be required to produce the units estimated to be sold during the coming year. (Do not round intermediate calculations.)
What is the highest price, in terms of a rate per hour, that Montrose Toy Company should be willing to pay for additional capacity (that is, for added direct labor time)? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)
Highest Price:_______ Per hour
The Montrose 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 the best sales and production mix for the coming year. The company has provided the following data:
Explanation / Answer
Product
Product
Product
a b c d e f g h i jProduct
Demand Selling Direct Direct DLH Rate/Hr DLH Hr/Unit Variable OH cost /unit @$3/DLH Total Variable cost/Unit Contribution/Unit=b-h Contibution Margin /DLH=i/f Total DLH required for demand of the year=a*f Next year Price Materials Labor (units) per Unit Marcy 25,200 45.00 4.50 6.30 22.00 0.29 0.86 11.66 33.34 116.43 7,216.36 Tina 41,200 37.00 3.60 5.20 22.00 0.24 0.71 9.51 27.49 116.31 9,738.18 Cari 39,200 34.00 6.90 13.30 22.00 0.60 1.81 22.01 11.99 19.83 23,698.18 Lenny 45,200 32.00 5.10 11.00 22.00 0.50 1.50 17.60 14.40 28.80 22,600.00 Sewing kit 452,000 31.00 3.20 4.90 22.00 0.22 0.67 8.77 22.23 99.82 100,672.73 1 Contribution Margin/DLHProduct
Contibution Margin /DLH Marcy 116.43 Tina 116.31 Cari 19.83 Lenny 28.80 Sewing kit 99.82 2 TOTAL DLH requiredProduct
Total DLH required for demand of the year=a*f Marcy 7,216.36 Tina 9,738.18 Cari 23,698.18 Lenny 22,600.00 Sewing kit 100,672.73 TOTAL DLH required 163,925.45 3 The minimum contribution is from Cari =$11.99/unit At Labor rate 42.15/Hr , the contribution from Cari=0. Therefore maximum rate that can be given for additional labor is =$42.15/DLH.