Question

Metal Cabinet, Inc. produces two types of filing cabinets. Material costs for the two drawer model are $75. The four-drawer model contains $130 of material.

Their estimated monthly conversion costs follow:

Costs	Sheet Metal Cutting	Assembly	Painting
Labor Costs	$40,000	$28,000	$42,000
Handling Costs	$10,000	$14,000	$5,000
Maintenance Costs	$5,000	$2,000	$5,000
Power Costs	$2,000	$2,000	$3,000
Depreciation Expenses	$4,000	$2,000	$8,000
General Expenses	$3,000	$2,000	$2,000
-	-	-	-
Total Hours During the Period	3,200	1,000	5,000
-	-	-	-
Hours required for the Two Drawer Cabinet	3	1	2
Hours required for the Four Drawer Cabinet	5	2	3

9.1 How much should the two drawer cabinet be priced if markup is 50% of cost?

		$211
		$369
		$316.50
		$553.50

Answer 1

According to the scenario, computation of the given data are as follows:

we calculate cost of sheet metal, cutting assembly and painting one by one.

So,

Sheet Metal Cost = (Sheet metal total cost / Total Hours During the Period ) * Two drawer model hours

By putting the value in the formula, we get

= (($40,000 + $10,000 + $5,000 + $2,000 + $4,000 + $3,000) / 3,200) * 3

= ($61,000 / 3,200) * 3

= $60

Cutting Assembly Cost = (Cutting Assembly Total Cost / Total Hours for cutting assembly ) * Two drawer model hours

By putting the value in the formula, we get

= (($28,000 + $14,000 + $2,000 + $2,000 + $2,000 + $2,000) / 1,000) * 1

= ( $50,000 / 1,000) * 1

= $50

Painting Cost = (Painting Total Cost / Total Hours for painting) * Two drawer model hours

By putting the value in the formula, we get

= (($42,000 + $5,000 + $5,000 + $3,000 + $8,000 + $2,000) / 5,000) * 2

= ( $65,000 / 5,000 ) * 2

= $26

Hence, Total Cost = Two drawer model material cost + Sheet Metal Cost + Cutting Assembly Cost + Painting Cost

= $75 + $60 + $50 + $26

= $211

Hence, Price = Total Cost + (50% * total Cost)

= $211 + (50% * $211)

= $211 + $105.5

= 316.5

Hence, The answer is $316.5.