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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

Answer

Answer

Cost of material available Answer

Less: Answer

Answer

Total materials used Answer

Less: Answer

Answer

Direct materials used Answer

Direct labor Answer

Manufacturing overhead

Indirect material Answer

Building rent Answer

Machinery rent Answer

Answer

Answer

Total manufacturing overhead Answer

Total manufacturing costs Answer

Round answer to two decimal places.

Product cost per unit Answer

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

Answer

Answer

Answer

Gross profit on sales Answer

Operating expenses:

Answer

Answer

Answer

Answer

Answer

Answer

Answer

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

$Answer

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