Reference no: EM132569041

Shorewood Manufacturing produces a single product requiring the following direct material and direct labor:

                                   Cost per Unit of Input                Required Amount per Unit of Product

Material A                              $16 / pound                              10 ounces

Material B                               $10 / pound                             8 ounces

Material C                              $40 / gallon                             0.3 gallon

Cutting labor                            $18 / hour                               30 minutes

Shaping labor                          $22 / hour                                  15 minutes

Finishing labor                            $24 / hour                                 $45 minutes

Manufacturing overhead consists of indirect material, $0.60 per unit of product; indirect labor, $1,000 per month plus $0.70 per unit of product; factory maintenance, $14,000 per year plus $0.55 per unit of product; factory depreciation, $15,000 per year; and annual factory property taxes, $8,000. Selling and administrative expenses include the salaries of a sales manager, $30,000 per year; an office manager, $18,000 per year; and two salespersons, each of whom is paid a base salary of $11,000 per year and a commission of $3 per unit sold. Advertising and promotion of the product are done through a year-round media package program costing $1,000 per week.

Question a. Analyze all cost and expense factors to determine a general formula (based on units of production) for total cost.

Round variable cost per unit answers to two decimal places, if applicable.

Total Fixed Costs Variable Cost per Unit

Material A

Material B

Material C

Cutting labor

Shaping labor

Finishing labor

Manufacturing overhead:

Indirect material

Indirect labor

Factory maintenance

Factory depreciation

Factory property taxes

Selling and administration expenses:

Sales administration salaries

Office administration salaries

Sales salaries and commissions

Advertising and promotion

Total component cost

Question b. Assuming a relevant range of 10,000 to 20,000 units, what is the estimated unit cost for producing and selling 10,000 units? 20,000 units?

Round answers to two decimal places.

Estimated per unit cost for 10,000 units

Estimated per unit cost for 20,000 units

Question c. If 15,000 units are produced and sold in a year, what selling price results in a net income before taxes of $60,000? Round answers to two decimal places, if needed.