Question
T&J manufacturing has a factory that produces custom kitchen cabinets. It has multiple product lines. Materials and labor for the cabinets are determined by each
T&J manufacturing 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 $1,000 for the wood and other direct materials of $200. Both items listed are on a per job basis. It requires 20 hours of labor on average for a custom kitchen. The hourly rate is $10. The sales price will be set at a markup of 65%. The company estimates that it will have 16,000 direct labor hours in total for all product lines. 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 Office Utilities and Misc office expenses(based on units sold) $ 20,000 Sales Travel(based on units sold) $ 24,000 Insurance - office $ 12,000 Depreciation - office equipment $ 40,000 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
6. Prepare three CVP Income Statements using the following yearly volumes: 400, 800 and 1,200. Do not recalculate the MOH costs per unit. Keep in mind how variable and fixed costs behave. The traditional income statement from #4 should be about the same net income as the 800 units for the CVP format.(use exhibit 20-12 page 893 as your example please note that it is missing a title and your numbers are for a year.) a) Calculate Break-even in units and sales $ for the company b) Calculate units and sales $ if the company wants a profit of $1,000,000. c) Margin of safety for 800 units. Discuss the importance of these calculations to a company. Compare and contrast the traditional vs CVP format. Fully discuss the differences(at least 3) between the traditional vs CVP format. Give examples supported by numbers of how you would use these calculations as the CFO of the company.
SHOW WORK please!
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started