SAIFUL HAFIZ BIN A. RAHMAN
1. Determine which of Sportway’s option makes the best use of its scarce resource. How many Skateboards & Tackle Boxes should be manufactured? How many Tackle Boxes should be purchased?
a) The best use of its scarce resource.
Analysis of Product
| |Tackle Box |Skateboard | |Direct Labor Cost |$ 18.75 |$ 7.50 | |Direct Labor ($15.00 per hour) |$ 15.00 |$ 15.00 | |Direct Labor Hour per unit |1.25 |0.5 | |Maximum Production unit |8,000 |20,000 | |Maximum Labor Hour |10,000 |10,000 |
Capacity constrains max 10,000
Plastic Department could produce 8,000 units of Tackle Box, OR 20,000 units of skateboards.
Calculating manufacturing overhead per unit for Tackle Box
|Allocated Fixed Manufacturing Overhead |$ 50,000 | |(Divide) Total Labor hours |10,000 | |Manufacturing Overhead per hour |5 | |(Plus) Labor Hour per unit |1.25 | |Manufacturing Overhead per unit |$ 6.25 |
Calculating CM per unit manufactured Tackle Box
|Selling Price per Boxes | |$ 86.00 | |Variable Cost: | | | |Molded Plastic |$ 8.00 | | |Hinges, Latches, Handle |$ 9.00 | | |Direct Labor ($ 15.00 per hour) |$ 18.75 | | |Manufacturing Overhead per unit |$ 6.25 | | |Selling and Administrative Cost |$ 11.00 | | |Total Variable Cost | |$ 53.00 | |Contribution Margin per unit | |$ 33.00 | |Fixed Cost | | | |Manufacturing Overhead |$ 6.25 | | |Selling and Administrative Cost |$ 6.00 | | |Total Fixed Cost | |$ 12.25 | |Net Profit per Boxes...