Question

Hannah Ortega is considering expanding her business. She plans to hire a salesperson to cover trade shows. Because of compensation, travel expenses, and booth rental, fixed costs for a trade show are expected to be $11,400. The booth will be open 30 hours during the trade show. Ms. Ortega also plans to add a new product line, ProOffice, which will cost $175 per package. She will continue to sell the existing product, EZRecords, which costs $96 per package. Ms. Garcia believes that the salesperson will spend approximately 20 hours selling EZRecords and 10 hours marketing ProOffice.

Required

1. Determine the estimated total cost and cost per unit of each product, assuming that the salesperson is able to sell 82 units of EZRecords and 45 units of ProOffice.

2. Determine the estimated total cost and cost per unit of each product, assuming that the salesperson is able to sell 194 units of EZRecords and 109 units of ProOffice.

(For all requirements, round "Cost per unit" to 2 decimal places.)

	EZRecords ProOffice a. Total cost of sales Cost per unit b. Total cost of sales Cost per unit

Answer 1

		EZ Records	Pro Office
a.	Total cost of sales	$15472	$11675
	Cost per unit	$188.68	$259.44
b.	Total cost of sales	$26224	$22875
	Cost per unit	$135.17	$209.86

Explanations :-

(a) Total Cost of Sales :-

	EZ Records	Pro Office
Fixed cost*	($11400/30 hours * 20 hours) =$7600	($11400/30 hours * 10 hours) =$3800
Cost of Package	(82 units * $96) =$7872	(45 units * $175) =$7875
Total Cost of Sales	$15472	$11675

*Fixed cost should be allocated on the basis of Marketing Hours

Cost per unit :-

	EZ Records	Pro Office
Total Cost of Sales	$15472	$11675
Units sold	82 units	45 units
Cost per unit	($15472/82 units) =$188.68	($11675/45 units) =$259.44

(b) Total Cost of Sales :-

	EZ Records	Pro Office
Fixed cost*	($11400/30 hours * 20 hours) =$7600	($11400/30 hours * 10 hours) =$3800
Cost of Package	(194 units * $96) =$18624	(109 units * $175) =$19075
Total Cost of Sales	$26224	$22875

*Fixed cost should be allocated on the basis of Marketing Hours

Cost per unit :-

	EZ Records	Pro Office
Total Cost of Sales	$26224	$22875
Units sold	194 units	109 units
Cost per unit	($26224/194 units) =$135.17	($22875/ 109 units) =$209.86