Highest price for additional capacity?
What is the highest price, in terms of a rate per hour, that Brandilyn Toy Company should be willing to pay for additional capacity?
Product Demand
Next year
(units) Selling
Price
per Unit Direct
Materials Direct
Labor
Marcy 33,000 $38.00 $3.80 $4.20
Tina 39,000 $24.00 $2.80 $2.40
Cari 49,000 $26.00 $5.20 $9.00
Lenny 38,000 $18.00 $3.30 $4.80
Sewing kit 450,000 $11.00 $1.90 $2.40
The following additional information is available:
a.
The company’s plant has a capacity of 149,200 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 $12.00 per hour is expected to remain unchanged during the coming year.
c. Fixed costs total $416,000 per year. Variable overhead costs are $6.00 per direct labor-hour.
d. All of the company's nonmanufacturing costs are fixed.
e. The company’s finished goods inventory is negligible and can be ignored.
What is the highest price, in terms of a rate per hour, that Brandilyn Toy Company should be willing to pay for additional capacity?
