Question

UR Safe Systems installs home security systems. Two of its systems, the ICU 100 and the ICU 900, have these characteristics:

Design Specifications	ICU 100			ICU 900			Cost Data
Video cameras		1			3		$	118	/ea
Video monitors		2			5		$	30	/ea
Motion detectors		1			7		$	20	/ea
Floodlights		2			8		$	6	/ea
Alarms		3			4		$	15	/ea
Wiring		730	ft.		1,130	ft.	$	0.2	/ft.
Installation		17	hr		29	hr	$	11	/hr

The ICU 100 sells for $940 installed, and the ICU 900 sells for $1,650 installed.

Required:

1. What are the current profit margin percentages on both systems?

2. UR Safe’s management believes that it must drop the price on the ICU 100 to $880 and on the ICU 900 to $1,520 to remain competitive in the market. Recalculate profit margin percentages for both products at these price levels and then compute the target cost needed for each product to maintain the current profit margin percentages.

Answer 1

Part-1
		ICU-100		ICU900
	Unit Cost	Qty	Cost	Qty	Cost
Video Camera	118	1	118	3	354
Video Monitor	30	2	60	5	150
Motion Detector	20	1	20	7	140
Floodlights	6	2	12	8	48
Alarms	15	3	45	4	60
Wtring	0.2	730	146	1130	226
Installation	11	17	187	29	319
Total Cost			588		1297
Price			940		1650
Profit			352		353
Profit Margin			37%		21%
			(352/940*100)		(353/1650*100)

Part-2
	ICU100	ICU900
Cost	588	1297
Price	880	1520
Profit	292	223
Profit Margin	33%	15%
	(292/880*100)	(223/1520*100)