The Walton 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 an economical sales and production mix for the coming year. The company has provided the following data:

Product	Demand Next year (units)	Selling Price per Unit	Direct Materials	Direct Labor
Debbie	60,000	$19.50	$5.30	$2.80
Trish	52,000	$ 6.00	$2.10	$1.20
Sarah	45,000	$33.00	$7.94	$5.20
Mike	52,000	$13.00	$3.00	$3.60
Sewing kit	335,000	$ 9.00	$4.20	$0.80

The following additional information is available:

a.	The company’s plant has a capacity of 103,250 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 $8 per hour is expected to remain unchanged during the coming year.
c.	Fixed costs total $620,000 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 negligible and can be ignored.

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.)

2.	Calculate the 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.)

3.	Based on response to Requirement 1 & 2, how much of 103,250 direct labor hours of capacity will be allocated to Walton Toy Company’s various products?

4.	What is the highest total contribution margin that the company can earn if it makes optimal use of its constrained resource?

5.	What is the highest price, in terms of a rate per hour, that Walton Toy Company would be willing to pay for additional capacity (that is, for added direct labor time)? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

What do YOU think ?
While we're happy to HELP we wont do all the work for you.
Show us what you have done and where you are having problems..

I have completed #1, but I am completely unsure where I go from there. There are no notes to help me with this problem.

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Originally Posted by Curlyben

What do YOU think ?
While we're happy to HELP we wont do all the work for you.
Show us what you have done and where you are having problems..

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I have completed #1 of the problems, but I am unsure where to go from there.

2 requires you to make some calculations based on the data you have been given

3 ditto

4 you need to do optimisation calculations, this can be done using matrix algebra

5 the price is that which might reduce the profit to zero or budgetted profit, etc

Still looking for help.

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Originally Posted by paraclete

2 requires you to make some calculations based on the data you have been given

3 ditto

4 you need to do optimisation calculations, this can be done using matrix algebra

5 the price is that which might reduce the profit to zero or budgetted profit, etc

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This is somewhat helpful, but if you could explain how to do them or the equations, that would be much appreciated

You have been given the direct labour rate, the labour in each unit, the number of units, the available hours from this you can calculate the answers to question 2 and 3. When you know the profit contribution from each unit you can determine what the product mix should be. To explain all of this to you would require more time than is available here since it spans a semester in management accounting and we do not provide model answers