stion 5 (6.5 Points) ompany produces 10,000 units per month from Product A.Te pr
ID: 2657357 • Letter: S
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stion 5 (6.5 Points) ompany produces 10,000 units per month from Product A.Te product are as follows: . Labor:0.30 hours are needed to produce one unit wof The deails of cost elements for Material: 0.50 kg is needed to produce one unit with a to produce one unit with a cost of $30 per kg- Factory overheads: 85% of the total direct cost. a cost of $30 per labor hour Other indirect costs: 15% of the total direct cost. Packaging cost and other charges: 15% of the total cost (direct Assuming that the company desired profit is 25% of the total man total manufacturing cost (direct cos, packaging costs, and other costs), use the "bottom-up" estimating 3.5 Points) o estimate the total manufacturing cost per unit and the selling price pt Product A The company has performed a market survey and found that the best price for Product A is $28/unit. The company has also performed on this product and found that the material cost (S2 competitor's selling b. a value engineering and should be per kg) is what should the material cost per kg be in order to achieve the target price of $28/unit. (3 Points) ing that other requirements, costs, and charges remain the same; recalculateExplanation / Answer
a)Total labour costs=0.3*10000*30=90000
Total material cost=0.5*10000*2=10000
factory overhead=85%*(labour+material)=85%*(90000+10000)=85000
Other indirect costs=15%*(90000+10000)=15000
packaging and other cost=15%*(90000+10000+85000+15000)=30000
Total manufacturing cost per unit=(90000+10000+85000)/10000=18.5
Total costs=(90000+10000+85000+15000+30000)/10000=23
Selling price=cost/(1-profit%)
=23/(1-25%)=30.67
b)if selling price is 28 then then for profit 0f 25% cost price has to be
cost=28*(1-25%)=21
let material price pr kg =x
=21*10000=(90000+(5000x)+(85%*(90000+5000x))+(15%*(90000+5000x))+(15%*(90000+5000x+((85%*(90000+5000x)))+(15%*(90000+5000x)))
solving for x we get
=0.26
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