Problem
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
|
Friendly
|
Goody
|
Besty
|
Lovey
|
|
Demand (units)
|
87,000
|
72,400
|
60,900
|
69,600
|
123,800
|
|
Price per unit
|
$ 49.50
|
$ 42.50
|
$ 39.50
|
$ 25.50
|
$ 35.50
|
|
Variable costs:
|
|
|
|
|
|
|
Direct materials
|
5.40
|
4.60
|
8.40
|
6.40
|
4.20
|
|
Direct labour
|
6.40
|
4.00
|
11.20
|
8.00
|
3.20
|
The following additional information is available:
The company's plant has a capacity of 130,000 direct labour-hours per year on a single-shift basis. The company's present employees and equipment can produce all five products.
The direct labour rate is $16 per hour; this rate is expected to remain unchanged during the coming year.
Fixed manufacturing costs amount to $850,000 per year. Variable overhead costs are $7 per direct labour-hour.
All of the company's sales and administrative costs are fixed.
Task
A. 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.)
B. Keeping in mind the direct labour-hour capacity, what should be the company's product mix for the upcoming year? schedule in support of your recommendation. (Round "Per Unit" to 2 decimal places.)
C. 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)?
D. Assume again that the company does not want to reduce sales of any product. Identify ways the company could obtain the additional output. (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.)
Check all that apply
Adding another shiftunanswered
Contracting out some work to outside suppliers
Employing additional labour force
Expanding the workforce
Eliminating wasted labour time in the production process
Utilizing the unutilized capacity
Working overtime