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.)
.96
0.12
5.70
0.96
0.48
7.14

Contribution margin (b)
$15.60
$ 1.56
$12.51
$ 5.10
$ 3.36
Contribution margin per DLH (b) ÷ (a)
$26.00
$ 9.18
$13.90
$ 7.29
$28.00
*Direct labor cost per unit ÷ 8 per direct labor hours.
2.
Product
DLH
Per Unit
Estimated
Sales (units)
Total
Hours
Debbie
0.60 hours
75,000
45,000
Trish
0.17 hours
67,000
11,390
Sarah
0.90 hours
60,000
54,000
Mike
0.70 hours
36,000
25,200
Sewing Kit
0.12 hours
350,000
42,000
Total hours required
177,590
3.
Because the Mike doll has the lowest contribution margin per labor hour, its production should be reduced
by 18,000 dolls (12,600 excess hours divided by 0.70 hours production time per doll = 18,000 dolls). Thus,
production and sales of the Mike doll will be reduced to one-half of that planned, or 18,000 dolls for the
year.
An alternative means of deriving this solution is as follows:
Amount of constrained resource available
164,990
hours
Less: Constrained resource required for production
of 350,000 units of the Sewing Kit
42,000
hours
Remaining constrained resource available
122,990
hours
Less: Constrained resource required for production
of 75,000 units of the Debbie doll
45,000
hours
Remaining constrained resource available
77,990
hours
Less: Constrained resource required for production
of 60,000 units of the Sarah doll
54,000
hours
Remaining constrained resource available
23,990
hours
Less: Constrained resource required for production