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

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

$211

$369

$316.50

$553.50

Answer 1

Answer : Calculation of Selling Price of Four Cabinet drawer :

Cost of Material = 130

Cost of Sheet Metal = (Total Cost / Total Hours During the Period) * Hours required for the Four Drawer Cabinet

= [(40000 + 10000 + 5000 + 2000 + 4000 + 3000) / 3200] * 5

= 100

Cost of Cutting Assembly = (Total Cost / Total Hours During the Period) * Hours required for the Four Drawer Cabinet

= [(28000 + 14000 + 2000 + 2000 + 2000 + 2000) / 1000] * 2

= 100

Cost of Painting = (Total Cost / Total Hours During the Period) * Hours required for the Four Drawer Cabinet

= [(42000 + 5000 + 5000 + 3000 + 8000 + 2000) / 5000] * 3

= 39

Price = Total Cost + (50% of total Cost)

= 130 + 100 + 100 + 39 + (50% * 369)

= 553.5