Reference no: EM132746409
Xyz firm is in the manufacture of goods. They manufacture mallets required a set.
Mallets consist of a head and handle. Handles use 2.5 board feet per handle at ` 50 per board foot. Spoilage loss is negligible for the manufacture of handles. Heads frequently split and create considerable scrap.
A head requires 0.40 board feet of high quality lumber costing ` 60 per board foot. Spoilage normally works out to 20% of the completed heads. 4% of the spoiled heads can be salvaged and sold as scrap at ` 10 per spoiled head.
In the department machining and assembling the mallets, 6 men work 8 hours per day for 25 days in a month. Each worker can machine and assemble 12 mallets per uninterrupted 40 minutes time frame. In each 8 hours working day, 15 minutes are allowed for coffee-break, 8 minutes on an average for training and 9 minutes for supervisory instructions. Besides 10% of each day is booked as idle time to cover checking in and checking out changing operations, getting materials and other miscellaneous matters. Workers are paid at a comprehensive rate of ` 6 per hour.
The department is geared to produce 20,000 mallets per month and the monthly expenses of the department are as under:
Finishing and painting of the mallets............................... 20,000
Lubricating oil for cutting machines..................................... 600
Depreciation for cutting machine.................................... 1,400
Repairs and maintenance................................................... 200
Power to run the machines................................................ 400
Plant Manager's salary................................................... 9,400
Other overheads allocated to the department..................... 60,000
Required
Problem i. As the mallets are machined and assembled in lots of 250, a total cost sheet for one lot and advise the management on the selling price to be fixed per mallet in order to ensure a minimum 33.33% margin on the selling price.