Classic Cabinets has a factory that produces custom
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 800 units 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 |
QUESTIONS:
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.
What are the variable costs for this product line? What are the fixed costs? I would recommend that you show a schedule for each area on a yearly basis. For the variable costs, also, show them on a per unit (800 units)
What is the Contribution Margin (CM) in total and per unit dollars, and CM% for the sale of 800 kitchen cabinets?
Prepare a traditional Income Statement assuming a volume of 800 units. For the cost of goods sold, please use the per unit cost you calculated in #1. You do not have to prepare any additional schedules. I recommend that you list out all operating expenses given above. Do not use just Selling and General/Administrative Expenses for your categories. You must list out all period costs. You can ignore interest and income tax expense.
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Rating:
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Solution: Classic Cabinets has a factory that produces custom