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 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

5. Prepare a traditional Income Statement assuming a volume of 800 units. For the cost of goods sold, please use the per unit cost you calculated in #1. You do not have to prepare any additional schedules. I would use a similar format to exhibit 16-8 on page 737 or from your lecture notes. I recommend that you list out all operating expenses given above. Do not use just Selling and General/Administrative Expenses for your categories. Points will be lost by not listing out all period costs. You can ignore interest and income tax expense.

SHOW WORK please!

Answer 1

	Calculation of Per Unit Cost of Custom Kitchen Cabinets
	Particulars	Working	Per Unit ($)	Total Cost ($)
	Sales Units			800 Units
	Direct material	$1,000 + $200	1,200.00	960,000
	Direct Labour	20 Hrs X $10/Hr	200.00	160,000
	Prime Cost		1,400.00	1,120,000
	Overheads
	Salary for factory personal	Total Cost / 800 Units	275.00	220,000
	Factory Rent	Total Cost / 800 Units	25.00	20,000
	Depriciation for Factory Equipments	Total Cost / 800 Units	87.50	70,000
	Factory Property Tax	Total Cost / 800 Units	12.50	10,000
	Maintenance for Factory Equipments	Total Cost / 800 Units	100.00	80,000
	Factory Cost		1,900.00	1,520,000
	Markup @65%		1,235.00	988,000
	Sales Price		3,135.00	2,508,000
	Income Statement of T&J for Custom Kitchen Cabinet for 800 Units
	Particulars			Amount ($)
	Sales			2,508,000
	Less: Cost of Goods Sold			1,520,000
	Gross Profit			988,000
	Less:
	Advertising			20,000
	Sales Commission			45,000
	Salaries to administrative Staff			520,000
	Sales Travel			24,000
	Depriciation - office equipment			40,000
	Insurance of office			12,000
	Office Rent			125,000
	Office Utilities and Misc Exp			20,000
	Income from Operations			182,000