manufacturer of tennis rackets manufacturer of tennis racket

PROBLEM 6 Elliott Company, a manufacturer of tennis rackets, started production in November 2017. For the preceding 5 years, Elliott had been a retailer of sports equipment. After a thorough survey of tenn racket markets, Elliott decided to turn its retail store into a tennis racket factory. Raw materials cost for a tennis racket will total $23 per racket. Workers on the production lines are paid on average $15 per hour. A racket usually takes 2 hours to complete. In addition, the rent on the equipment used to produce rackets amounts to $1,300 per month. Indirect materials cost $3 per racket A supervisor was hired to oversee production; her monthly salary is $3,500. Janitorial costs are $1,400 monthly. Advertising costs for the rackets will be $8,000 per month. The factory building depreciation expense is $8,400 per year. Property taxes on the factory building will be $9,600 per year. Instructions (a) Assuming that Elliott manufactures, on average, 2,500 tennis rackets per month, enter each cost item on your answer sheet, placing the dollar amount per month under the appropriate headings. Total the dollar amounts in each of the columns (b) Compute the cost to produce one racket. OTE: Write your answer on the sheet presented on the following page.

Solution

Answer

Cost

Variable cost (per racket)

Total Variable cost (for 2500 rackets)

Total Fixed cost (per month)

Total Cost

[A]

[B = A x 2500]

[C]

[B + C]

Raw Materials

$                   23.00

$                     57,500.00

$                           -  

$                 57,500.00

Direct labor Cost

$                   30.00

$                     75,000.00

$                           -  

$                 75,000.00

Rent on Equipment

$                          -  

$                                    -  

$              1,300.00

$                   1,300.00

Indirect Material

$                     3.00

$                       7,500.00

$                           -  

$                   7,500.00

Supervisor\'s Salary

$                          -  

$                                    -  

$              3,500.00

$                   3,500.00

janitorial Cost

$                          -  

$                                    -  

$              1,400.00

$                   1,400.00

Advertisement Cost

$                          -  

$                                    -  

$              8,000.00

$                   8,000.00

Factory Building Depreciation

$                          -  

$                                    -  

$                  700.00

$                       700.00

Property taxes

$                          -  

$                                    -  

$                  800.00

$                       800.00

TOTAL

$                   56.00

$                 1,40,000.00

$            15,700.00

$             1,55,700.00

A

Total Cost

$       1,55,700.00

B

Total Units

       2,500

C=A / B

Cost to produce 1 racket

$                   62.28   [155700/2500]

Cost	Variable cost (per racket)	Total Variable cost (for 2500 rackets)	Total Fixed cost (per month)	Total Cost
	[A]	[B = A x 2500]	[C]	[B + C]
Raw Materials	$                   23.00	$                     57,500.00	$                           -	$                 57,500.00
Direct labor Cost	$                   30.00	$                     75,000.00	$                           -	$                 75,000.00
Rent on Equipment	$                          -	$                                    -	$              1,300.00	$                   1,300.00
Indirect Material	$                     3.00	$                       7,500.00	$                           -	$                   7,500.00
Supervisor\'s Salary	$                          -	$                                    -	$              3,500.00	$                   3,500.00
janitorial Cost	$                          -	$                                    -	$              1,400.00	$                   1,400.00
Advertisement Cost	$                          -	$                                    -	$              8,000.00	$                   8,000.00
Factory Building Depreciation	$                          -	$                                    -	$                  700.00	$                       700.00
Property taxes	$                          -	$                                    -	$                  800.00	$                       800.00
TOTAL	$                   56.00	$                 1,40,000.00	$            15,700.00	$             1,55,700.00