Reference no: EM132468811

Coastal Manufacturing has a factory that produces custom bathroom 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 Coastal Manufacturing's cost structure for 2019.

Point 1: The materials include $1,600 for the wood and other materials on a per job basis.

Point 2: It requires 20 hours of labor on average for a custom bathroom. The hourly rate is $15.

Point 3: The sales price will be set at a markup of 75%.

Point 4: The company estimatesthat it will have 20,000 direct labor hours in total for the bathroom cabinets.

Point 5: It assumes 1,000 units are sold on average per year.

A breakdown of estimated yearly costs related to the bathroom cabinets follows:

Salaries- office & administrative                                                   $ 450,000

Salaries for factory personal                                                        $ 180,000

Office Rent                                                                                $ 125,000

Factory Rent                                                                               $ 20,000

Office Utilities and Misc office expenses(based on units sold)                 $ 10,000

SalesTravel(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

Question 1. AssumingCoastal Manufacturing is considering adding another product line - bookshelves(keeping the cabinet production constant at 1,000 units). How many units should the company sell to make adding the additional line economically feasible/attractive? Adding this line will require hiring a different type of worker which costs the company $15/hour. Coastal Manufacturing estimated each unit takes 10 hours of labor, and $500 direct materials. This line is estimated to incur additional fixed MOH $466,250 for the year, and variable costs/expenses per unit are the same as the cabinet product line. This bookshelf product line does not add additional fixed period costs, but shares the fixed period costs with the Cabinet line. The company estimated sales price of each bookshelf would be $1,500.