T&J manufacturing has a factory that produces custom kitchen cabinets. It has multiple product lines. Materials and
Question:
T&J manufacturing 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 direct 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 all product lines.
It assumes 800 units are sold on average per year. A breakdown of estimated yearly costs related to the kitchen cabinets follows:
Materials, Wood 1000
Materials, other 200
direct labor 20 hours
direct labor $10/hour
The sales price will be set at a markup of 65%.
direct labor hours 1600 hours
800 units are sold on average per year 800 units/year
Salaries- office & administrative $520,000
Salaries for factory personal: $220,000
Office Rent $125,000
Factory Rent $20,000
Office Utilities and Misc office expenses(based on units sold) $20,000
Sales 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
Q3. create a Job Order Cost sheet for the following custom kitchen: Materials $3,500 and 30 hours of labor. What is the customer price?
What other factors would impact the sales price for this type of company? Can a company rely on setting price based on just a % on cost?
Q4. What is the Contribution Margin (CM) in total dollars, CM% and per unit for the sale of 800 kitchen cabinets? Explain the importance of CM and how it can be used by companies to predict future income. Create some examples with numbers to show how it can be used.