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Case In Accounting

CASE 3A – JOZEF PLASTICS

The management of Jozef Plastics, Inc. is in the process of preparing a budget for the next year. The company manufactures cars mats, dishware, and figures that can be used as decorations or as toys for children. Some changes in prices and costs are expected along with changes in sales volume. Data from operations for the past year are provided by the controller, Erica Eitan, as follows:

Figures Mats Dishware

Units sold 550,000 1,200,000 350,000

Unit selling price $12.00 $8.00 $40.00

Variable costs per unit:

Materials $3.00 $3.00 $12.00

Indirect materials and supplies .40 .40 1.00

Labor 1.50 1.50 6.00

Packing and shipping .60 .60 1.50

Utilities .50 .50 .50

Fixed costs:

Supervision $ 230,000

Employee benefits 765,000

Postage and telephone 73,000

Property taxes and insurance 126,000

Heat and light 192,000

Repairs and maintenance 94,000

Depreciation 86,000

Advertising 549,000

Travel and entertainment 162,000

Sales office, other sales expenses 236,000

Office and administration 372,000

Total fixed costs $2,885,000

The sales volume of figures for next year is expected to be 80 percent of the volume for the past year. The sales volume of mats is expected to remain constant. The volume of dishware sales should increase by 10 percent if the advertising budget is increased by $ 170,000. The selling price of figures is to be reduced to $10 per unit, and the selling price of mats is to be increased to $9 per unit.

Materials prices per unit of product next year have been estimated as follows:

Figures $3.50

Mats 3.50

Dishware 14.00

Labor cost for next year is estimated at $2 per unit for both figures and mats. For dishware, labor is estimated at $7 per unit....