The Montrose Toy Company manufactures a line of dolls and a doll dress sewing ki
ID: 2517975 • 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.
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.)
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
1.
2.
Working:
4.
The highest price that the company would be willing to pay for additional direct labor time is $28.80, which is the lowest contribution per labor hour among the products.
Marcy Tina Cari Lenny Sewing Kit Unit Selling Price $45.00 $37.00 $34.00 $32.00 $31.00 Variable costs: Direct material $4.50 $3.60 $6.90 $5.10 $3.20 Direct labor $6.30 $5.20 $13.30 $11.00 $4.90 Variable overhead $0.86 $0.71 $1.81 $1.50 $0.67 Total variable cost $11.66 $9.51 $22.01 $17.60 $8.77 Unit Contribution Margin $33.34 $27.49 $11.99 $14.40 $22.23 Direct labor hours per unit $0.29 $0.24 $0.60 $0.50 $0.22 Contribution Margin per hour $116.43 $116.31 $19.83 $28.80 $99.82 Working: Marcy Tina Cari Lenny Sewing Kit Direct labor cost $6.30 $5.20 $13.30 $11.00 $4.90 Direct labor rate per hour $22.00 $22.00 $22.00 $22.00 $22.00 Direct labor hours per unit 0.29 0.24 0.60 0.50 0.22 Variable overhead rate per hour $3.00 $3.00 $3.00 $3.00 $3.00 Variable overhead cost per unit $0.86 $0.71 $1.81 $1.50 $0.67