Question # 1

CLASSIFICATION OF COST

Variable Cost:
Sales travel(based on units sold) 24,000
Office utilities and Misc office expenses(based on units sold) 15,000
Sales commissions(based on units sold) 50,000

Total variable cost 89,000

Variable cost per unit 49.44 (89,000/1,800 units)
Direct material cost Per unit (Wood) 2,800
Direct labour cost per unit (24*11) 264
Variable cost per unit 3,113.44 (89,000/1,800 units)

Fixed Cost:
Office Rent 150,000
Office & Administrative Salaries 500,000
Insurance - office 12,000
Maintenance for factory equipment 80,000
Depreciation - office equipment 40,000
Depreciation for factory equipment 70,000
Advertising 20,000
Factory Property taxes 25,000

Total Fixed Cost 897,000

Product Cost:
Direct Material (Wood) 2800*1800 5,040,000
Direct Labour cost (24*11*1800) 475,200
Office utilities and Misc office expenses(based on units sold) 15,000
Sales travel(based on units sold) 24,000
Factory Personnel Salaries 350,000
Factory Rent 30,000
Sales commissions(based on units sold) 50,000
Maintenance for factory equipment 80,000
Depreciation for factory equipment 70,000

Total Product Costs 6,134,200

Period Cost:
Office & Administrative Salaries 500,000
Office Rent 150,000
Insurance - office 12,000
Depreciation - office equipment 40,000
Advertising 20,000
Factory Property taxes 25,000

Total Period Cost 747,000

Question # 2
Calculation of Total MOH:
Factory Personnel Salaries 350,000
Maintenance for factory equipment 80,000
Factory rent 30,000
Depreciation for factory equipment 70,000

Total MOH 530,000

Calculation of overhead rate:

Total MOH 530,000
Total direct labor hours 43,200

Overhead rate per direct labor hour 12.27

Calculation of MOH per unit:

Overhead rate 12.27
Direct labor hour per unit 24

MOH per unit 294.44

Calculation of total cost of manufacturing one unit:

MOH per unit 294
Variable cost per unit 3,113

Manufacturing cost per unit 3,408

Calculation of Sale price per unit:

Total cost per unit 3,408
Markup on cost 80%

Sale price per unit 6,134

Question # 3
Job Order Cost Sheet

Particulars Amount
Materials 6,000
Direct labor (30 hours at $11 per hour) 330
Manufacturing overhead (based on direct labor hours) 3,482
Total manufacturing cost 9,812

Calculation of Manufacturing Overhead:

Overhead rate 12
Direct labor hours (Given in question) 30
Manufacturing overhead 368

Calculation of Total Manufacturing Cost:

Variable cost 3,113
Manufacturing overhead 368
Total manufacturing cost 3,482

Calculation of Sale Price:

Total cost per unit 3,482
Markup on cost 80%
Sale price per unit 6,267
Question # 4
Calculation of Sale price per unit:
Total Manufacturing cost 3,408
Markup on cost 80%
Sale price 6,134

Total Revenue 6,134

Total Manufacturing cost:
MOH per unit 294
Variable cost 3,113
3,408

Contribution margin per unit 2,726

Calculation of Contribution Margin Percentage

CM per unit 2,726
Sale price per unit 6,134

CM % 44.44%
Question # 5
Income Statement

Amount

Sales 11,041,560 6501 * 1800

Cost of sales
- (total manufacturing cost per
unit * no of units) 6,134,200 3612 * 1800

Gross Profit 4,907,360

Operating expenses 747,000

Net Income 4,160,360
Question # 6
Income Statement
No of Units
Units sold 1200 1800 2500

Sales 7,361,040 11,041,560 15,335,500

Cost of sales 4,089,467 6,134,200 8,519,722
Gross Profit 3,271,573 4,907,360 6,815,778

Operating expenses #NAME? 747,000 747,000

Net Income #NAME? 4,160,360 6,068,778

Calculation of break-even point in units:

Fixed cost 897,000
Variable cost per unit 3,113
Sale price per unit 6,134

Contribution margin per unit 3,021

Break-even point in units (Fixed cost / contribution margin) 296.95

Calculation of break-even point in dollars:

Contribution margin ratio 0.49
Fixed Cost 897,000

Break-even point in dollars 1,821,523.56

Calculation of units and sale for profit $ 5,000,000/-

Total fixed cost 530,000
Contribution margin per unit 2,726
Profit 5,000,000

Number of units ( (Fixed cost + Profit)/ Contribution Margin ) 2,028

Sale Revenue #NAME?

Calculation of Margin of Safety in dollars for 1,800 units.

Total Sales 11,041,560
Break-even Sales 1,821,524
Margin of Safety 9,220,036
Question # 7
Income Statement
No of Units
Units sold 1800*1.03 = 1854 2,500*1.03 = 2575 3000*1.03 = 3090

Sales 7,581,871 11,372,807 15,795,565

Cost of sales 6,321,755 8,780,215 10,536,258
Gross Profit 1,260,116 2,592,592 5,259,307

Operating expenses 1,083,150 1,083,150 1,083,150

Net Income 176,966 1,509,442 4,176,157

Workings
Revised Costs Current Revision Revised
Variable costs:
Direct material cost 2800 5% 2,660
Other variable cost per unit 313.4444444 3% 323 Other variable cost will increase as a result
Total variable cost 2,983

Fixed cost
Manufacturing overhead 294 45.0% 427
Total Manufacturing cost 3,410

Operating cost 747000 45% 1,083,150

will increase as a result of increase in sales
Question # 8
Units should the company sell to make adding the additional line economically feasible/attractive

Cabinetry Molded Do
1,800 500
Sales 11,041,560 925,000
Cost of sales
Variable cost 5,604,200 500,000
MOH 530,000 425,000
Gross profit 4,907,360 -
Operating expenses 747,000
Net profit 4,160,360 -

So, from the above calculations performed, it would need to be assured that the
company has to sell atleast 500 units of Molded Doors in order to meet the break-
even. And if the company has meet its break-even point, then the project would be
economically feasible.

Calculation of cost of manufacturing Molded Doors:

Direct Material 850
Direct Labor (10 * 15) 150
Variable cost 3,113

Variable cost per unit 4,113

sible/attractive

Total
2,300
11,966,560

6,104,200
955,000
4,907,360
747,000
4,160,360