Muschup Corporation produces wooden rocking horses. In the upcoming year, the sales department estimates the firm will be able to fill demand for their product, which should be 10,000 units.

The firm tries to keep an inventory of 500 finished horses on hand at all times, but at the end of this year, inventory has dropped to 200 horses, valued at $35,000.

Each unit sells for $200, and uses 20 board-feet of wood that costs $2.50 per board-foot and a quart of paint that costs $20 per quart. The firm tries to keep inventories of 2,000 board-feet of wood and 400 quarts of paint on hand at all times. At the end of this year, inventories contain 1,800 board-feet of wood and 500 quarts of paint.

Each horse requires 8 hours of direct labor, paid at $8 per hour. Muschup estimates that variable overhead costs $2 per direct labor hour. Fixed overhead is estimated at $247,200, and selling, general, and administrative costs are estimated at $100,000