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1. Everyone working 40 hours week over 50 weeks in a year, as we are giving 2 weeks vacation in December and other 2 weeks as a sick time and holidays
Total productive time per year= 40 hrs week * 50 weeks= 2,000 hrs
2. We are taking cost per unit
3. Total fixed cost is $ 1,99,00 and productive time per year is 2,000 hrs
Overhead/hour= $1,99,00/2,000= $9.95
4. Overhead Per Hour is $80.00 and it takes two hours to produce one unit,
Overhead Burden Per Unit will be $9.95 X 2 = $19.9.
5. If we assume that 10 employees will be involved in the production of a bottle of oil and it is assumed that collectively they are all involved for a total of 1 minute in the production of that unit, then this amounts to 1.66% of an hour’s total labour involved in the product. If the average labour rate is $ 9.95, then the labour cost/unit is: $9.95 X 1.66/100 = $ 0.16517/unit.
6. Other variable cost is 34901.
7. Total product per unit is 34932
8. Total product cost = 38532/124732= 0.308
9. Profit margin is 25%= 17*25%= 4.25
10. Final price is 21.25 (17+4.25)