In the current year, Lennox and Steward were approached by Le Bon who wants to buy 60 sofas. Lennox and Steward want to know the manufacturing costs for this job, considering Voguish Couches has a production budget of 600 sofas for the current year. For allocating the manufacturing overhead (i.e., indirect cost pool) Voguish Couches uses the direct labour-hours (i.e., cost-allocation base), but Coombes is struggling with job costing in manufacturing and has asked for your help.

Required

a) Calculate the direct manufacturing costs, the indirect manufacturing costs, and the total manufacturing costs of this job. (Job costing in manufacturing, Chapter 3, 10 marks)

b) Using a mark-up percentage of 30%, how much should Lennox and Steward charge for the order of 60 sofas? Considering the actual figures for the current year follow what has been budgeted, Will Voguish Couches be profitable if Lennox and Steward use a mark-up percentage of 30% for all sales during the current year? Use your calculations for supporting your argument. (Cost plus pricing, Chapter 12, 10 marks)