In: Accounting
Column1 | Column2 | Column3 | Column4 | Column5 | Column6 | Column7 | Column8 | Column9 | Column10 |
Part 1 | |||||||||
Technology Inc. predicted 2017 variable and fixed costs are as follows: | |||||||||
Variable costs | Fixed costs | ||||||||
Manufacturing | 480,000 | 315900 | |||||||
Selling and Administrative | 216,000 | 60500 | |||||||
Total | 696,000 | 376,400 | |||||||
Technology Inc. produces a wide variety of computer interface devices. Per unit | |||||||||
manufacturing cost information about one of these products, a high-capacity flash drive is as follows: | |||||||||
Direct material | $10 | ||||||||
Direct labor | 9 | ||||||||
Variable Manufacturing Overhead | 7 | ||||||||
Fixed Manufacturing Overhead | 9 | ||||||||
Total manufacturing costs | $35 | ||||||||
The following is the variable selling and administrative costs for the flash drive: | $6 | ||||||||
Management has set a 2017 target profit on the flash drive of: | $250,000 | ||||||||
Required: | |||||||||
1. Determine the markup percentage on variable costs required to earn the desired profit | |||||||||
2. Use the variable cost markup to determine a suggested selling price for a flash drive. You are determining selling price per unit) | |||||||||
3. For the flash drive, break the markup on variable costs into separate parts for fixed costs and profit. | |||||||||
4. Explain what the minimum unit selling price a company would use in special order decision, if the company had excess capacity. | |||||||||
5. In the long run, what would be the lowest unit selling price the company would sell for? Explain your answer. |