A. Product Labor Costs
You are making a new product. The cost of materials is $22.59. One person can assemble four per hour. You pay that person $10.25 per hour. What is the labor cost for the product? Did you say that the answer is $10.25/4 or $2.5625?
Consider what that $10.25 per hour person really costs you. You pay 6.2% social security and 1.45% Medicare on the employee’s pay. You have a 401K that you match 4% of the employee’s pay (assume everyone participates in the 401K). Your workers’ compensation insurance is $2.55 per $100 of payroll. The average paid vacation for your employees is three weeks. Everyone gets eleven paid holidays and ten paid personal days. All of your workers get two 20 minute paid breaks per day. Your facility works 5 days per week and 8 hours per day. You have done a study and have found that out of the remaining 7 hours 20-minute work day, your employees’ efficiency is 74%. You do your best to operate with no overtime, but your overtime runs 5% (i.e., 5% of the hours worked in a year are on overtime and paid with a 50% premium).
Your task is to create a spreadsheet to accurately cost the labor. Make the spreadsheet to allow easy costing of labor for other products.
B.
Product Costing
The cost of materials is $22.59. One person can assemble four per hour. You pay that person $10.25 per hour. The cost of packaging is $1.50 and it takes 5 minutes to package the product. You pay the person that does the packaging $10.25 per hour. All other costs are included in manufacturing overhead that is charged at 50% of the product material and labor. Sales, general, and administrative cost is charged at 40% of the total manufactured cost. What is the total manufactured cost of the product? All products are required to sell at a minimum profit of 20%. What is the minimum selling price?
You believe that you can sell the product for $99.98. What is the profit in dollars and percentage?
The union at the manufacturing facility just negotiated a new contract. The new labor rate is $10.97 per hour. They also got an additional personal day. What is the profit in dollars and percentage now?
Solved by K. E. in 16 mins