Total Manufacturing Cost, Income Statement, Unit Cost, and Selling Price

You are consulted by Investors, Inc., a group of investors planning a new product. They have estimates of the costs of materials, labor, overhead, and other expenses for the year but need to know how much to charge for each unit to earn a profit during the year equal to $10\%$ of their estimated investment of $$600,000($ignore income taxes$).$

Their plans indicate that each unit of the new product requires the following:

Direct Material $4$ lb$.$ of a material costing $$7\mathrm{.}20$ per lb$.$

Direct labor $3$ hrs$.$ of adie cutter'stime at $$10\mathrm{.}80$ per hr$.$

$2$ hrs$.$ of an assembler's time at $$9\mathrm{.}60$ per hr$.$

Major items of production overhead would be annual rent of $$48,000$ on the factory building and $$30,000$ on machinery as well as indirect material of $$25,200.$ Other production overhead is an estimated $60\%$ of total direct labor costs. Selling expenses are an estimated $20\%$ of total sales, and non$-$factory administrative expenses are $10\%$ of total sales.

The consensus at Investors is that during the year $4,000$ units of product should be produced for selling and another $1,000$ units should be produced for the next year's beginning inventory. Also, an extra $6,000$ pounds of material 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.

Do not use negative signs with any of your answers.

Estimated Total Manufacturing Cost

For the Year Ended December $31$

Direct material:

Beginning materials inventory Answer

$0$

Answer

Cost of materials purchased

Answer

$0$

Cost of material available Answer

$0$

Less: Answer

Ending materials inventory

Answer

$0$

Total materials used Answer

$0$

Less: Answer

Indirect materials used

Answer

$0$

Direct materials used Answer

Direct labor Answer

$0$

Manufacturing overhead

Indirect material Answer

$0$

Building rent Answer

$0$

Machinery rent Answer

$0$

Answer

Other factory overhead

Answer

$0$

Total manufacturing overhead Answer

$0$

Total manufacturing costs Answer

$0$

Round answer to two decimal places.

Product cost per unit Answer

$0$

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

Income Statement

For the Year Ended December $31$

Answer

Sales

Answer

$0$

Answer

Cost of goods sold

Answer

$0$

Gross profit on sales Answer

$0$

Operating expenses:

Answer

Selling expenses

Answer

$0$

Answer

Administrative expenses

Answer

$0$

Answer

$0$

Answer

Net income

Answer

$0$

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

$Answer

$0$