I just need help with #3. Soft and Cuddly Friends (SCF) produces soft dolls. Dem
ID: 2555037 • Letter: I
Question
I just need help with #3.
Soft and Cuddly Friends (SCF) produces soft dolls. Demand for the dolls is increasing, and management wants you to identify an economical sales and production mix for the coming year. The following information is available: Softy 75,000 $ 28.50 Friendly 62,800 13.50 Goody 52,500 44.50 Besty 60,000 22.50 Lovey 107,000 $ 18.50 $ $ $ Demand (units) Price per unit Variable costs: Direct materials Direct labour 13.25 6.00 5.25 3.75 18.60 10.50 7.50 7.50 10.50 3.00 The following additional information is available: a. The company's plant has a capacity of 110,000 direct labour-hours per year on a single-shift basis. The company's present employees and equipment can produce all five products. b. The direct labour rate is $15 per hour; this rate is expected to remain unchanged during the coming year. c. Fixed manufacturing costs amount to $730,000 per year. Variable overhead costs are $6 per direct labour-hour. d. All of the company's sales and administrative costs are fixed. Required: 1. How many total direct labour-hours will be required to produce the units estimated to be sold during the coming year? Show your computations. (Round your answers to 2 decimal places.) Softy Friendly Goody Besty Lovey DLH Per Unit 0.40 0.25 0.70 0.50 0.20 2.Keeping in mind the direct labour-hour capacity, what should be the company's product mix for the upcoming year? Prepare a schedule in support of your recommendation. (Round "Per Unit" to 2 decimal places.) Product Direct Labour-Hour Per Unit Estimated Sales (Units) Total Hours Softy Friendly Goody Besty Lovey Total hours required 0.40 hours 0.25 hours 0.70 hours 0.50 hours 0.20 hours 75,000 62,800 52,500 60,000 107,000 30,000 15,700 36,750 30,000 21,400 133,850 3. What is the highest price, in terms of a rate per hour, that SCF would be willing to pay for additional capacity (i.e., for added direct labour time)? Highest price per hour $ 12Explanation / Answer
Soft and Cuddly Friends Softy Friendly Goody Besty Lovey Direct Labor cost $ 6.00 $ 3.75 $ 10.50 7.5 3 Direct Labor Rate $ 15.00 $ 15.00 $ 15.00 15 15 Direct Labor Hours required to produce one unit=(direct labor cost/Direct labor rate) $ 0.40 $ 0.25 $ 0.70 $ 0.50 $ 0.20 Soft and Cuddly Friends Softy Friendly Goody Besty Lovey Selling Price Per Unit=(A) $ 28.50 $ 13.50 $ 44.50 $ 22.50 $ 18.50 Variable cost Per Unit Direct Materials cost $ 13.25 $ 5.25 $ 18.60 $ 7.50 $ 10.50 Direct Labor cost $ 6.00 $ 3.75 $ 10.50 $ 7.50 $ 3.00 Variable cost Per Unit=($6* Direct Labor hour per unit) $ 2.40 $ 1.50 $ 4.20 $ 3.00 $ 1.20 Total Variable cost=(B) $ 21.65 $ 10.50 $ 33.30 $ 18.00 $ 14.70 Contribution Margin per unit=(c )=(A)-(B) $ 6.85 $ 3.00 $ 11.20 $ 4.50 $ 3.80 Direct Labor hours required to produce one unit $ 0.40 $ 0.25 $ 0.70 $ 0.50 $ 0.20 Direct Labor Hours required to produce one unit=(Contribution Margin Per unit/Direct Labor Hours Required per unit) $ 17.13 $ 12.00 $ 16.00 $ 9.00 $ 19.00 (ii) (iv) (iii) (v) (i) Production Hours per unit Total Hours Lovey 107000 $ 0.20 21400 Softy 75000 $ 0.40 30000 Goody 52500 $ 0.70 36750 Friendly 62800 $ 0.25 15700 Besty 12300 $ 0.50 6150 Total Hours 110000 Total Contribution Margin in case of constriant variable Softy Friendly Goody Besty Lovey Total Production 75000 62800 52500 12300 107000 Contribution Margin Per unit $ 6.85 $ 3.00 $ 11.20 $ 4.50 $ 3.80 Total Contribution $ 513,750.00 $ 188,400.00 $ 588,000.00 $ 55,350.00 $ 406,600.00 $ 1,752,100.00 Total Contribution $ 1,752,100.00 Less: Fixed Cost $ 730,000.00 Total Profit $ 1,022,100.00 Direct Labor Hours 110000 Highest Price $ 9.29