Question

In: Economics

Q2. A company is producing 2200 plates per day. The direct material cost for producing 1200...

Q2. A company is producing 2200 plates per day. The direct material cost for producing 1200 plates is AED 5300/- Direct labor cost per day is AED 3200.00 and factory over head is AED 4200.00 . If the selling cost is 28 % of the factory cost , what must be the selling price of each plate to release a profit of 20 % of the selling price ?

Expert Solution

Let the selling price is X.

Profit = X × 20% = 0.20X

Material cost per unit = Total material cost for 1200 units / 1200 units

= 5300 / 1200

= 4.4166

Labor cost per unit = Total labor cost per day / Production per day

= 3200 / 2200

= 1.4545

Factory overhead per unit = Total factory overhead per day / Production per day

= 4200 / 2200

= 1.9090

Factory cost per unit = Material cost per unit + Labor cost per unit + Factory overhead per unit

= 4.4166 + 1.4545 + 1.9090

= 7.7801

Selling cost per unit = Factory cost per unit × 28%

= 7.7801 × 28%

= 2.1784

Total cost per unit = Factory cost per unit + Selling cost per unit

= 7.7801 + 2.1784

= 9.9585

Selling price = Total cost per unit + Profit

X = 9.9585 + 0.20X

0.80X = 9.9585

X = 9.9585 / 0.80 = 12.448125

Answer: Required selling price is 12.45 (rounded).

Rahul Sunny answered 2 years ago

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