Solomon Manufacturing Co. expects to make 30,700 chairs during the 2017 accounti

Question

Solomon Manufacturing Co. expects to make 30,700 chairs during the 2017 accounting period. The company made 4,800 chairs in January. Materials and labor costs for January were $17600 and $25,600, respectively. Solomon produced 1,200 chairs in February. Material and labor costs for February were $8,600 and $12,900, respectively The company paid the $521,900 annual rental fee on its manufacturing facility on January 1, 2017 Required Assuming that Solomon desires to sell its chairs for cost plus 45 percent of cost, what price should be charged for the chairs produced in January and February? (Round intermediate calculations and final answers to 2 decimal places.) January February Price

Explanation / Answer

Rental fee will be allocated based on total chairs to be produced in a year

Rental fee to be allocated per chair

= Total fee / Total chairs to be produced in a year

= $521,900 / 30,700

= $ 17 per chair

Direct costs for January per unit

= (Material + Labor) / Number of chairs produced in January

= ($17,600 + $25,600) / 4,800

= $9 per chair

So, Total per chair for January

= $17 + $9

= $26 per chair

Selling price

= Cost x (1 + Percentage)

= $26 x (1.45)

= $ 37.7 per chair

Direct costs for February per unit

= (Material + Labor) / Number of chairs produced in February

= ($8,600 + $12,900) / 1,200

= $ 17.92 per chair

So, Total per chair for February

= $17 + $17.92

= $34.92

Selling price

= Cost x (1 + Percentage)

= $34.92 x 1.45

= $ 50.63

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