Watauga Concrete Products, Inc. manufactures and sells concrete block for residential and commercial building. WCP expects the
Question:
Watauga Concrete Products, Inc. manufactures and sells concrete block for residential and commercial building. WCP expects the following sales in the first quarter of 2021:
Type 1 concrete block: 1,200,000 units
Type 1 sales price: $0.65
Type 2 concrete block: 800,000 units
Type 2 sales price: $0.60
The company is planning a sales price increase of $0.15 for both products in the third quarter.
WCP estimates 15% growth per quarter and 3% average sales returns/allowances/discounts.
Company management desires to keep 10% of next quarter's sales projections in finished goods inventory and 12% of next quarter's production requirements in raw materials inventory.
Type 1 blocks use a 1:3:5 mix by volume of Portland Cement, Sand, and Stone Aggregate. Type 2 blocks use a 1:6 mix by volume of Portland Cement and Stone Aggregate. Portland Cement is $0.08 per unit by volume, Sand is $0.015 per unit by volume, and the stone aggregate is $0.03 per unit by volume.
The company uses two classes of labor for the two different activities. Mixing requires .005/hour per block and workers are paid $10.00/hour. Shaping entails filling, curing, and releasing the molds and is higher skilled labor .Each block requires .01/hour of shaping at a cost of $16/hour. (T1 and T2 blocks have equal requirements for time in both activities).
Variable manufacturing overhead is $8 per direct labor hour. Fixed overhead is budgeted at $320,000 per quarter ($100,000 for supervision, $200,000 depreciation, and $20,000 for rent).
WCP's only variable marketing expense is a 2% commission on net sales. WCP has no variable administrative expense. Fixed sales and administrative expenses for each quarter include:
College Mathematics for Business Economics Life Sciences and Social Sciences
ISBN: 978-0321614001
12th edition
Authors: Raymond A. Barnett, Michael R. Ziegler, Karl E. Byleen