# 5 what is the highest price in terms of a rate per

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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