A company is a wooden product manufacturer specializing in wood kitchen and home products such as paper towel and napkin holders, coasters, canisters, dish racks, coat racks, and magazine holders. The company is looking to branch out into the garden market and wants to start by producing wooden bird houses or bird feeders. The company plant already possesses the machinery and a fabrication and assembly department to make the houses and feeders. The following information includes costs for each product and the projected numbers for the first month.
A company is a wooden product manufacturer specializing in wood kitchen and home products such as paper towel and napkin holders, coasters, canisters, dish racks, coat racks, and magazine holders. The company is looking to branch out into the garden market and wants to start by producing wooden bird houses or bird feeders. The company plant already possesses the machinery and a fabrication and assembly department to make the houses and feeders. The following information includes costs for each product and the projected numbers for the first month. You are to present the product to the Board of Directors. The proposal should anticipate numbers for operating production for one year. In order for the product to be considered, the bird house has to be produced at a minimum of 4,300 units the first year. I. Product and Company Background Bird House Components: Wood and plastic Direct Materials: ? Wood: 0.80 ft. per unit of product; cost is $6.00 per foot ? Plastic: 0.50 lb. per unit of product; cost is $0.80 per pound ? Need: Wood 290ft ? Need: Plastic: 340 lbs. = 360 houses to sell at $22 per unit Direct labor requirements for the first month: Bird House ? Fabrication 0.20 hr. at $15 per hour ? Assembly 0.30 hr. at $11 per hour Below is the current financial information for the company. These numbers do not reflect the impact of the new product you plan to recommend. ? Revenue: $3,453,234 ? Operating Expenses: $ 1,984,342 ? Net Income: $1,468,892 Estimated factory overhead costs for the first month (current/unadjusted): ? Indirect factory wages $78,000 ? Power and light $7000 ? Depreciation of plant and equipment $19,300 ? Insurance and property tax $3,700 Estimated operating expenses for the first month (current/unadjusted): ? Sales salaries expense $58,000 ? Advertising expense $25,000 ? Office salaries expense $36,000 ? Depreciation expense office equipment $700 ? Telephone expense $832 ? Office supplies expense $300 II….
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