23 May DETERMINE THE CONTRIBUTION MARGIN PER DIRECT LABOR-HOUR EXPENDED ON EACH PRODUCT.
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 69,000 $41.00 $4.60 $4.00
Trish 61,000 $ 4.50 $1.50 $1.00
Sarah 54,000 $30.50 $9.29 $7.00
Mike 46,800 $15.00 $3.90 $5.00
Sewing kit 344,000 $ 9.90 $5.10 $0.50
The following additional information is available:
The company’s plant has a capacity of 100,400 direct labor-hours per year on a single-shift basis. The company’s present employees and equipment can produce all five products.
The direct labor rate of $10 per hour is expected to remain unchanged during the coming year.
Fixed costs total $575,000 per year. Variable overhead costs are $2 per direct labor-hour.
All of the company’s nonmanufacturing costs are fixed.
The company’s finished goods inventory is negligible 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.)
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