The Walton Toy Company manufactures a line of dol s and a do

The Walton Toy Company manufactures a line of dol s 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 DemandPrice Mater540 Next year (un ts) SellingDirect $ 6.50 S30.00 $15.00 347,000 $1020 per Unt Materials $4.90 $1.80 $9.74 $4.20 $5.40 $1.89 S8.75 $4.95 1.44 64,000 57,000 40.000 Sarah Sewing kit The following additional information is available a. The company\'s plant has a capacity of 155,110 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 $9 per hour is expected to remain unchanged during the coming year c. Fixed costs total $605,000 per year. Variable overhead costs are $5 per direct labor-hour d. All of the company\'s nonmanufacturing costs are fixed. e. The company\'s finished goods inventory is negigible 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.) Product Margin per DLH Debbio Trish Sarah Mke Sowing kit

Solution

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	Calculation of Labour Hour Required for each product
		Labour Cost	Rate per hour	Labour hours	Demand	Labour hrs required
	Debbie	4.05	9	0.45	72000	32400
	Trish	1.89	9	0.21	64000	13440
	Sarah	6.75	9	0.75	57000	42750
	Mike	4.95	9	0.55	40000	22000
	Sewing Kit	1.44	9	0.16	347000	55520
	Total Labour Hours Required	166110
(1)	Statement of Contribution
		Debbie	Trish	Sarah	Mike	Sewing Kit
	Selling Price	18	6.5	30	15	10.2
	Material Cost	4.9	1.8	9.74	4.2	5.4
	Labour cost	4.05	1.89	6.75	4.95	1.44
	Variable OH	2.25	1.05	3.75	2.75	0.80
	Contribution	6.80	1.76	9.76	3.10	2.56
	Labour hrs	0.45	0.21	0.75	0.55	0.16
	Cont. per Hour	15.11	8.38	13.01	5.64	16.00
	Ranking	2	4	3	5	1
(2)	Total Direct Labour Hours to be Required
	Product	Demnd	Hrs per unit	Total Labour Hrs
	Debbie	72000	0.45	32400
	Trish	64000	0.21	13440
	Sarah	57000	0.75	42750
	Mike	40000	0.55	22000
	Sewing Kit	347000	0.16	55520
	Total Hours Required	166110
(3)	Allocation of Labour Hours
	Product	Total Lab Hrs	Rank	Allocated Hrs
	Debbie	32400	2	32400
	Trish	13440	4	13440
	Sarah	42750	3	42750
	Mike	22000	5	11000
	Sewing Kit	55520	1	55520
		166110		155110
(4)	Statement of Total Contribution
	Product	Allocated Hrs	Cont. per hr	Total Cont.
	Debbie	32400	15.11	489,600.00
	Trish	13440	8.38	112,640.00
	Sarah	42750	13.01	556,320.00
	Mike	11000	5.64	62,000.00
	Sewing Kit	55520	16.00	888,320.00
		155110		2,108,880.00
(5)	Addition Highest Price per labour hour
	Additional Contribution from Mike			5.64