Calculate the full manufacturing cost of the sail

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Marine suppliers Ltd makes sails for sailing boats on a made-to-measure basis. The company expects to incur the following costs during the next month: Direct labour costs £60,000 Direct labour time 6,000 hours Indirect labour costs (production line supervisor) £9,000 Indirect materials (lubricant for the machines) £800 Other manufacturing indirect costs (energy, depreciation of machines, rent) £10,000 The company also expects to use manufacturing equipment (machines) during 2,000 hours. A customer has asked for a quotation for a sail. Marine suppliers estimates that 12 direct labour hours, 5 machine hours and 20 square metres of sail cloth (at a cost of £2 per square metre) will be needed to manufacture this sail.

Assignment :

Question 1: What would you recommend as allocation factor for each type of indirect costs? Why?

Question 2: Calculate the full manufacturing cost (COGS) of the sail

Question 3: If Marine suppliers has a gross margin ratio target of 35% (of sales), what would be the quotation price? Hint: Gross margin ratio is: Sales revenue less Full manufacturing cost (COGS) Sales revenu

Reference no: EM132497379

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