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 job. To simplify the assignment, we will assume the following average costs.

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 companyestimatesthat 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

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

1)

Use a traditional Income Statement assuming a volume of 800 units.

For the cost of goods sold, please use (assuming my answer is right) per unit cost I calculated in the image below multiplied by number of units sold.

No additional schedules required.Please list out all operating expenses given above.Do not use just Selling and General/Administrative Expenses for your categories.You can ignore interest and income tax expense.

2)

How do you think the traditional Income Statement are different from the CVP Income Statement?

Give some reasons why they are different.

Manufacturing Overhead ISalaries to factory personnel 5 220,000 | |Factory rent 5 20,000 I Depreciation for factory equipment 5 70,000 IFactory property taxes 5 10,000 | |Maintenancefor factory equipment 5 80,000 I ITotal manufacturing overhead 5 400,000 ITotal directlabor hours (800 annual units sold*20 labor hours/unit] 5 16,000 | IMOH per direct labor hour(400,000 16,000) 5 25 I I I I I Il | Manufacturing Cost per unit I IDirect materials per unit 5 1,500 Direct labor (20 hours*$12/hr) S 240 I |Manufacturing overhead per unit (525 MOH *20 hours) 5 500 I |Total product manufacturing cost per unit 5 2,240 I Mark up 85% 5 1,904.00 LSale price per custom kitchen unit (52, 240 +51, 904) 5 4,144 |