What should the selling price of the product be if the company’s policy is to make a profit of 25% on selling price?

A product has a prime cost of £22,700. It takes 31 hours to make each unit. The overhead absorption rate is £20.00 per labour hour.

What should the selling price of the product be if the company’s policy is to make a profit of 25% on selling price?

Calculate and enter your answer to the nearest £.

Expert Solution

verhead Amount = $ 20 x 31 hours = $ 620

Income Statement
Prime Cost		22700
Add: Overheads		620
Total Cost		23320

 
Profit Amount is 25% of Sales.
Let Sales be X.
 
23320 + ( X * 0.25 ) = X
= 23320 + X/4 = X
= 23320 = X - X/4
= 23320 = 3X / 4
= x = (23320 * 4) / 3
= x = $ 31,093.33
 
Sale Price = $ 31,093.33 or $ 31,093

Sales Price: $31,093

Soumik Mallick Choudhury answered 2 years ago

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