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Comfy Toy Company manufactures large and small stuffed animal toys. It has a long - term contract with a large chain of discount stores to
Comfy Toy Company manufactures large and small stuffed animal toys. It has a longterm contract with
a large chain of discount stores to sell large and small stuffed animal toys each month. The
following cost information is available for large and small stuffed animal toys:
ITEM LARGE SMALL
Price per unit $ $
Variable costs per unit:
Direct material $ $
Direct labour
Variable support
Fixed costs per unit
Total costs per unit $ $
Estimated demand inclusive
of longterm contracts units units
Production occurs in batches of large or small stuffed animal toys. Each batch, regardless of
the toys size, takes a total of machine hours to manufacture. The total machine hour capacity of
machine hours cannot be increased for at least a year. Determine which size of stuffed animal toys is more profitable to produce under constrained
capacity. How many units of each size should Comfy Toy Company produce under the
current capacity ie machine hours Justify your answers with supporting
calculations
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