Copa Company, a manufacturer of stereo systems, started its production in October 2010. For the preceding 3 years Copa had been a retailer of stereo systems. After a thorough survey of stereo system markets, Copa decided to turn its retail store into a stereo equipment factory.
Raw materials cost for a stereo system will total $74 per unit. Workers on the production lines are on average paid $12 per hour. A stereo system usually takes 5 hours to complete. In addition, the rent on the equipment used to assemble stereo systems amounts to $4,900 per month. Indirect materials cost $5 per system. A supervisor was hired to oversee production; her monthly salary is $3,000.
Janitorial costs are $1,300 monthly. Advertising costs for the stereo system will be $8,500 per month. The factory building depreciation expense is $7,200 per year. Property taxes on the factory building will be $9,000 per year.