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The company produces one type of product. Its production volumes per year are 24 thousand. pcs....

The company produces one type of product. Its production volumes per year are 24 thousand. pcs. The production department employs four workers, who are paid 6 euros for each product produced. Each worker produces 6 thousand. pcs. products per year. The annual salary of the administration staff consists of 15,000 Eur. The raw materials required for the production of one product cost 5 Eur., And additional materials for one product - 1 Eur. The company uses machines in the production process, which cost 8,000 Eur and will be used for 5 years, and other equipment, which cost 900 Eur and will be used for 5 years. The company pays EUR 2,000 per year for the maintenance and management of the premises. Communication and other services cost the company 1700 Eur per year. The company plans to receive 30 percent. profit for each unit of product sold. Depreciation of fixed assets is calculated using the straight-line method.

Calculate the commercial cost, price (excluding VAT) and gross profit of one product.

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Expert Solution

Particular Pistons
Units = 24000
Per Unit Total
Material €     5.0000 €   120,000.00
Additional material €     1.0000 €     24,000.00
Worker cost €     6.0000 €   144,000.00
Factory overhead €     0.8533 €     20,480.00
Total Cost €   12.8533 €   308,480.00
Particular Amount
Maintainance of Premises €      2,000.00
Comunication cost €      1,700.00
Administration cost €    15,000.00
Depreciation on machine €      1,600.00
(8000 Euro / 5)
Depreciation on other equipment €          180.00
(900 Euro / 5)
Total €    20,480.00
Unit 24000
Cost per unit €          0.8533

We assume that profit is 'X' and profit require 30% means profit = 0.30X

Particular Pistons
Units = 24000
Per Unit Total
Material €     5.0000 €   120,000.00
Additional material €     1.0000 €     24,000.00
Worker cost €     6.0000 €   144,000.00
Factory overhead €     0.8533 €     20,480.00
Total Cost €   12.8533 €   308,480.00
Profit 0.30X   0.30X
Sales X X

So,

Sales = Total cost + Profit

X = € 12.85 + 0.30X

X - 0.30X = €12.85

0.70X = €12.85

X = €18.3619 or say €18.36 so profit = 0.30X so 0.30 x €18.36 = €5.508

or

Sales = Total Cost +Profit

X = €308,480 + 0.30X

X = €440,685.71 so profit = 0.30X sp 0.30 x €440,685.71 = €132,205.71

Particular Pistons
Units = 24000
Per Unit Total
Material €     5.0000 €         120,000
Additional material €     1.0000 €           24,000
Worker cost €     6.0000 €         144,000
Factory overhead €     0.8533 €           20,480
Total Cost €   12.8533 €         308,480
Profit €     5.5080 €         132,192
Sales €       18.36 €         440,672

Commercial cost = €12.8533 per unit or €308,480 for 24000 units

Price (excluding vat)= €18.36 per unit or €440,672 for 24000 units

Gross profit = €5.5080 per unit or €132,192 for 24000 units

If any help require for this question please comment, I will help you.

jeff jeffy answered 2 years ago
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