The compnany's goal is to produce 319,500 pizzas in the first year. They plan to keep a one month supply of pizzas in finished goods inventory. The materials costs are as follows:
Materials Cost(Complete Per Pizza)
Dough Shells = $.12
Sauce Package = $.20
Cheese Package = $.08
Meat Package = $.30
Assembly Package = $.04
Labor Costs(Estimated)
Direct Labor Rate = $7.50/hour(plus $2.50/hour fringe benefits)
Indirect Labor/Month(including fringe)
Supervisor = $3,000
Other indirect labor = $2,000
Overhead Costs(estimated, per month)
Rent on Production Facility = $1000
Utilities = $1,475
Other Overhead
Indirect Materials = $2,500
Maintenance = $1,000
Quality Inspection = $2,000
Equipment (lease) = $2,500
Selling and Administrative Costs (estimated, per month)
Administrative salaries = $4,000
Salaries of sales staff = $5,000
Product promotion and advertising = $2,000
Utilities and insurance = $500
Lease of office furniture and equipment = $800
First year, 346,664 pizzas were estimated. 336,033 pizzas were actually produced. Direct material costs were $248,664 and direct labor costs were $840,082 for 84,000 hours worked. Estimated overhead costs for the year were $191,700, while actual overhead was $193,000.