Good Furniture Ltd. manufactures a single type of desk for office use. Components are purchased from various suppliers and are then assembled at the company’s factory. You have been asked to 

(a) calculate the cost of manufacturing in 2021 using the information below and 

(b) outline a plan for saving costs in 2022 by improving manufacturing efficiency (shorten the time spent to assemble each desk).

You have been provided with the following cost information for 2021:

Labor to assemble one desk: 30 minutes @ £20/hour.
10 pounds

The company charges manufacturing overheads to products on the basis of assembly hours. Budgeted hours and overhead costs for 2021 is 1,760 hours at a total overhead cost of £21,120.

Required:
Calculate the cost of manufacturing in 2021:

Calculate the total direct cost of manufacturing one desk.

Calculate the overhead absorption rate (per assembly hour).

Calculate the overhead cost of manufacturing one desk.

Calculate the total manufacturing cost of manufacturing one desk.

If Good Furniture Ltd. sells its desks at full manufacturing cost plus a mark-up of 40%, what the sales price per unit would be?

Decide on a time spent to assemble each desk (less than 30 minutes). Assume all other costs remain the same.

How many minutes each assembly worker will spend to assemble one desk in your plan?

Calculate the new total direct cost of manufacturing one desk in your plan.

Calculate the new overhead cost of manufacturing one desk in your plan.

Calculate the new total cost of manufacturing one desk in your plan.

If Good Furniture Ltd. sells its desks at full manufacturing cost plus a mark-up of 30% instead of 40%, what would be the new sales price per unit?

Comment on whether your labour cost saving plan is sufficient to cover the reduction of the mark-up from 40% to 30%.