P$2-3$A$.$ Total Manufacturing Cost, Income Statement, Unit Cost, and Selling Price Two inventors, recently organized as Innovation, Inc., consult you regarding a planned new product. They have estimates of the annual costs of materials, labor, overhead, and other expenses but need to know how much to charge for each unit to earn a profit equal to $15\%$ of their estimated total long$-$term investment of $$400,000($ignore income taxes$).$ Their plans indicate that each unit of the new product requires the following:

Direct materials:

$4lbs$ of a material costing $$5/$lb

Direct labor:

$2hrs$ of a metal former's time at $$11/$hr$.$

$0\mathrm{.}6hr$ of an assembler's time at $$8/$hr$.$

Major items of production overhead would be annual rent of $$46,460$ for a factory building, $$28,660$ rent for machinery, and $$21,700$ of indirect materials. Other production overhead is estimated to be $$233,280.$ Selling expenses are an estimated $30\%$ of total sales, and non$-$factory administrative expenses are $20\%$ of total sales.P$2-3$A$.$ Total Manufacturing Cost, Income Statement, Unit Cost, and Selling Price Two inventors, recently

organized as Innovation, Inc., consult you regarding a planned new product. They have estimates of the

annual costs of materials, labor, overhead, and other expenses but need to know how much to charge for

each unit to earn a profit equal to $15\%$ of their estimated total long$-$term investment of $$400,000($ignore

income taxes$).$ Their plans indicate that each unit of the new product requires the following:

The consensus at Innovation is that during the year, $10,000$ units of product should be produced for selling and another $2,000$ units should be produced for the next year's beginning inventory. Also, an extra $3,000$ pounds of materials will be purchased as beginning inventory for the next year. Because of the nature of the manufacturing process, all units started must be completed, so work$-$in$-$process inventories are negligible.

Required

a$.$ Incorporate the above data into a schedule of estimated total manufacturing costs and compute the unit production cost for the year.

b$.$ Prepare an estimated income statement that would provide the target amount of profit for the year.

c$.$ What unit sales price should Innovation charge for the new product?