Question
Classic Cabinets has a factory that produces custom kitchen cabinets. It has multiple product lines. Materials and labor for the cabinets are determined by each
Classic Cabinets 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 following information shows Classic Cabinets cost structure of 2018. The materials include $1,500 for the wood and other materials on a per job basis. It requires 20 hours of labor on average for a custom kitchen. The hourly rate is $12. The sales price will be set at a markup of 85%.
The company estimates that it will have 16,000 direct labor hours in total for the kitchen cabinets.
It assumes 800 units are sold on average per year. A breakdown of estimated yearly costs related to the kitchen cabinets follows:
Salaries- office & administrative | $ 520,000 |
Salaries for factory personal | $ 220,000 |
Office Rent | $ 125,000 |
Factory Rent | $ 20,000 |
Utilities and Misc. office expenses (based on units sold) | $ 20,000 |
Sales Travel (based on units sold) | $ 24,000 |
Insurance - office | $ 14,000 |
Depreciation - office equipment | $ 45,000 |
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 |
What is the Contribution Margin (CM) in total and per unit dollars, and CM% for the sale of 800 kitchen cabinets?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started