Reference no: EM132708571
Question - Venz Manufacturing produces a single product requiring the following direct materials and direct labor:
Description Cost per Unit of Input Required Amount per unit of Product
Material A $9/pound 20 ounces
Material B 7/pound 4 ounces
Material C 25/gallon 0.4 gallon
Cutting labor 12/hour 45 minutes
Shaping labor 15/hour 15 minutes
Finishing labor 14/hour 75 minutes
Manufacturing overhead consists of indirect materials, $0.60 per unit; indirect labor, $1,000 per month plus $0.75 per unit of product; factory maintenance, $17,000 per year plus $0.65 per unit of product; factory depreciation, $18,000 per year; and annual factory property taxes, $10,000. Selling and administrative expenses include the salaries of a sales manager, $40,000 per year; an office manager, $22,000 per year; and two salespersons, each of whom is paid a base salary of $15,000 per year and a commission of $4 per unit. Advertising and promotion of the product are done through a year-round media program costing $1,500 per week.
Answer the following:
a) Determine a general formula for total cost.
b) Assuming a relevant range of 10,000 to 30,000 units, what is the estimated unit cost for producing and selling 10,000 units? 25,000 units? Explain the variation, if any, in unit cost at the two levels of production
c) If 22,000 units are produced and sold in a year, what selling price results in a net income before income tax of $75,000?
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