# Accounting Cost

Topics: Contribution margin, Kilogram, Molding Pages: 2 (362 words) Published: October 29, 2012
1. If LTT sold only one type of doll, which doll would it produce? How many of these dolls would it make and sell? Taking into consideration one type of doll:

| Moulding department | Assembly Time| Contribution Margin| | | | | | | | |
Chatty Chelsey| 30000=| 20000| 8400 hours=| 25200| \$35 − 1.5 × \$10 – 1/3 × \$12=| 16| | 1.5 Kgs| | 1/3 hours| | | |
| | | | | | |
Talking tanya| 30000=| 15000| 8400 hours=| 16800| \$45 − 2 × \$10 − ½ × \$12=| 19| | 2 Kgs| | 1/2 hours| | | |
| | | | | | |
| | | | | | |

Chatty Chelsey:

20,000 × \$16 = \$320,000 Contribution Margin

Talking Tanya:
15,000 × \$19 = \$285,000. Contribution Margin

LTT should produce Chatty Chelsey because it is the most beneficiary for its operating income.

2. If LTT sells two Chatty Chelseys for each Talking Tanya, how many of each type would it produce and sell? What would be the total contribution margin?

The Molding department is the limiting constraint, thus, If LTT sells 2 Chatty Chelseys for each Talking Tanya, then the maximum number of Talking Tanya dolls the Molding Department can produce is:

(T alking Tanya × 2 kgs.) + ([2 × Talking Tanya] × 1.5 Kgs.) = 30,000 kgs.
2T + 3T = 30,000
5T = 30,000
Talking Tanya = 6,000

Calculating LTT only produces 6,000 Talking Tanyas and 12,000 Chatty Chelseys, the maximum contribution margin (CM) is:

CM = 12,000 × \$16 + 6,000 × \$19
= \$306,000

3. If LTT sells two Charry Chelseys for each Talking Tanya, how much would production and contribution margin increase of the Moulding Department could buy 10 more kilograms of materials for 10\$ per kilogram?

LTT would produce more dolls if they purchase ten more kilograms.
(Tanya × 2 kgs.) + ([2 × Tanya] × 1.5 kgs.) =10 kgs.
2T + 3T = 10
Tanya = 2
The result is:
2 Talking Tanya
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