• The materials include $6,500 for the wood and other materials on a per job basis.
• It requires 45 hours of labor on average for the cabinetry. The hourly rate is $12.
• The sales price will be set at a markup of 65%.
• The company estimates that it will have 90,000 direct labor hours in total for the cabinets.
• It assumes 2000 units are sold on average per year.

A breakdown of estimated yearly costs for the 2000 units follows:

	Salaries- office & administrative				$ 650,000
	Salaries for factory supervisor, janitor and security				$ 400,000
	Office Rent				$ 350,000
	Factory Rent				$ 100,000
	Office utilities and Misc office expenses(based on units sold)				$ 45,000
	Sales travel(based on units sold)				$ 24,000
	Insurance - office				$ 60,000
	Depreciation - office equipment				$ 40,000
	Depreciation for factory equipment				$ 85,000
	Advertising				$ 220,000
	Sales commissions(based on units sold)				$ 450,000
	Factory Property taxes				$ 16,000
	Maintenance for factory equipment				$ 80,000

1. Prepare three CVP Income Statements using the following yearly volumes: 500, 2000 and 2500. Keep in mind how variable and fixed costs behave. The traditional income statement from #4 should be about the same net income as the 2000 units for the CVP format. In addition, Q1, should agree to the total fixed costs and per unit variable costs for these schedules. (see PowerPoint from chat the week of the project for format)
   1. Calculate Break-even in units and sales $ for the company
   2. Contribution margin ratio
   3. Calculate units and sales $ if the company wants a profit of $1,000,000.
   4. Margin of safety in dollars for 2000 units.
2. Prepare a new CVP Income Statement that reflects the following proposed changes. The company is considering a new supplier and some additional factory costs to increase quality and production levels. The new supplier will reduce direct material costs by 5%. The fixed costs will increase costs by 48%. With the expected increase in quality, the company believes that it can support a 1% increase in sales price. The volume used should be 2000 units and maybe more volumes.