Reference no: EM133073145
Question - Classic Cabinets has a factory that produces custom kitchen cabinets. It has multiple product lines. Materials and labor for the cabinets are determined by each job. To simplify the assignment, we will assume the following average costs.
The following information highlights Classic Cabinet's cost structure for 2020.
The materials include $5,000 for materials on a per-job basis.
It requires 35 hours of labor on average for the cabinetry. The hourly rate is $15.
The sales price will be set at a markup of 85%.
The company estimates that it will have 70,000 direct labor hours in total for the cabinets.
It assumes 2,000 units are sold on average per year. A breakdown of estimated yearly costs related to the cabinetry follows:
Salaries- Sales force $594,000
Salaries for factory laborers $390,500
Office Rent $159,500
Factory Rent $35,200
Office utilities and Misc office expenses (based on units sold) $17,600
Sales travel (based on units sold) $25,300
Insurance - office $15,400
Depreciation - office equipment $45,100
Depreciation for factory equipment $79,200
Advertising $38,500
Sales commissions (based on units sold) $59,400
Factory Property taxes $28,600
Maintenance for factory equipment $93,500
Determine the average cost of manufacturing one unit given the volume expected to be sold every year and assuming the MOH costs are allocated based on the direct labor hours per unit. Please show all calculations and round to the nearest dollar. Calculate the sales price based on your cost calculation. I would recommend that you calculate the MOH per unit first. You should calculate an Overhead rate.