Reference no: EM132706828
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 materials include $1,000 for the wood and other materials of $200. Both items listed are on a per job basis. It requires 20 hours of labor on average for a custom kitchen. The hourly rate is $10. The sales price will be set at a markup of 65%.
The company estimates that it will have 16,000 direct labor hours in total for the kitchen cabinets
It assumes 800units are sold on average per year. A breakdown of estimated yearly costs related to the kitchen cabinets follows:
Salaries-office & administrative $520,000
Salaries for factory personal $220,000
Office Rent $125,000
Factory Rent $20,000
Utilities and Misc office expenses (based on units sold) $20,000
Travel (based on units sold) $24,000
Insurance -office $12,000
Depreciation -office equipment $40,000
Depreciation for factory equipment $70,000
Advertising $20,000
Sales commissions (based on units sold) $45,000
Factory Property taxes $10,000
Maintenance for factory equipment $80,000
Required - Determine the cost of manufacturing one custom kitchen assuming the units given. Assume the MOH costs are allocated based on the direct labor hours per unit. Please show all calculations and round to the nearest dollar. I would recommend that you calculate the MOH per kitchen first. You should calculate an Overhead rate. Discuss other options for the activity base and the importance of the MOH allocation. Do multiple product lines impact the MOH allocation?