Grogstore Co manufactures stainless steel beer barrels. The manufacturing depot has two production departments: cutting and welding. The direct costs of producing each barrel are as follows:
Materials: 2 m2 of stainless steel @ $3 per m2
Labour – cutting: 15 minutes per barrel @ $14 per hour
Labour – welding: 20 minutes per barrel @ $18 per hour
Budgeted overhead costs for next year are:
|
$ |
||
|
Property costs |
92,000 |
|
|
Managers’ salaries: |
||
|
Cutting department |
25,000 |
|
|
Welding department |
28,000 |
|
|
General administration costs |
143,000 |
|
|
Machine power |
28,000 |
The following information relates to each of the production departments:
|
Cutting |
Welding |
Total |
|
|
Floare Space(sq.m) |
35 |
25 |
60 |
|
Nomber of employees |
6 |
10 |
16 |
|
Labour hour |
9,000 |
17,000 |
26,000 |
What price should Grogstore charge for the barrels if it wishes to earn a profit mark up on total costs of 30 per cent?