The Montrose Toy Company manufactures a line of dolls and a doll dress sewing ki
ID: 2522248 • 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 154,000 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
Req 1 Marcy Tina Cari Lenny Sewing kit Direct labour cost 6.50 5.00 12.50 11.00 4.90 Labour rate per hour 22.00 22.00 22.00 22.00 22.00 Labour hours required per unit 0.30 0.23 0.57 0.50 0.22 Selling price per unit 47.00 35.00 32.00 32.00 31.00 Less: Variable ccst per unit Material 4.70 3.40 6.50 5.10 3.20 Labour 6.50 5.00 13.00 11.00 4.90 Oh @ 3 per hour 0.90 0.69 1.71 1.50 0.66 Contribution margin per unit 34.90 25.91 10.79 14.40 22.24 Labour hours 0.30 0.23 0.57 0.50 0.22 Contribution margin per hour 116.33 112.65 18.93 28.80 101.09 Req 2 Marcy Tina Cari Lenny Sewing kit Direct labour cost 6.50 5.00 12.50 11.00 4.90 Labour rate per hour 22.00 22.00 22.00 22.00 22.00 Labour hours required per unit 0.30 0.23 0.57 0.50 0.22 Maximum demand 25000.00 41000.00 39000.00 45000.00 450000.00 Total labour hours required 7500.00 9430.00 22230.00 22500.00 99000.00 Total labour horus required 160660.00 hourss Req 3: Total labour required 160660 Less: Available hours 154000 Shortage of hours 6660 (To be adjusted in Cari as it has lowest contribution margin per hour) Now, additional houurs available (it can be utilized in Cari only) Therefore, management is willing to pay aditional rate per hour which the firmis earning from Cari Therefore, maximum price the firm is ready to pay is: Existing rate per hour 22 Add: Contribution per hour earned 18.93 Maximum price paid by management 38.93