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Kim's Kimchi Products, Inc. Kim's Kimchi Products, Inc. has automated much of its production of specialized kimchi and orean appetizers. Machines are utilized in many areas of production and most of the labor time is spent in monitoring and testing for quality. Labor cost is, to a large extent, on a salary basis and is now included as indirect labor cost There is still some direct labor cost. However, the fixed overhead cost (that now includes what was once classified as direct labor) is a predominant part of total product cost. The materials cost per unit of kimchi is $12, and the direct labor cost is $2.50 per machine hour. Variable overhead costs (per machine hour) have been budgeted as follows Supplies and Other Indirect Materials Power Repairs and Maintenance of Equipment Total Unit Cost Per Machine Hour Per Machine Hour $0.60 $0.60 $0.40 $1.60 The fixed factory overhead has been budgeted for the year as follows. 47,500 Factory supervision Indirect labor Payroll taxes and fringe benefits Supplies and other indirect materials Power Heat and light Repairs and maintenance of equipment Repairs and maintenance of plant Taxes and insurance Telephone Miscellaneous factory overhead Depreciation TOTAL FIXED OVERHEAD 156,000 27,800 16,200 33,000 18,500 36,700 8,400 6,800 4,300 1,200 63,600 $420,000 The president of the company, Mr. Brian Aday, observes, "With such relatively high fixed overhead cost, it is imperative that we operate at a high volume level to absorb the cost