Question

Breed Products has performed extensive studies on its costs and production and estimates the following annual costs based on 165,000 units (produced and sold):

	Total Annual Costs (165,000 units)
Direct material	$	282,000
Direct labor		255,000
Manufacturing overhead		216,000
Selling, general, and administrative		139,000
Total	$	892,000

Required:

a. Compute Breed’s unit selling price that will yield a profit of $560,000, given sales of 165,000 units. (Round your answer to 2 decimal places.)

b. Compute Breed’s dollar sales that will yield a projected 20 percent profit on sales, assuming variable costs per unit are 50 percent of the selling price per unit and fixed costs are $651,000.

c. Management believes that a selling price of $7.80 per unit is reasonable given current market conditions. How many units must Breed sell to generate the revenues (dollar sales) determined in requirement (b)? (Round your final answer to nearest whole unit.)

Answer 1

Solution A
Description	Amount
Direct Material	282,000
Direct labor	255,000
Manufacturing overhead	216,000
Selling and general overhead	139,000
Required Profit	560,000
Requisite Sale proceeds	1,452,000
No of units	165,000
Unit Selling price	8.80
Solution B
Sale Price	100
Profit	20
Variable cost	50
Contribution required to meet profit and fixed cost	30
Fixed cost	651,000
Required Dollar Sale	651000/30%
Required Dollar Sale	2,170,000
Solution C
Total Dollar Sale	2,170,000
Unit Selling price	7.80
Total Units Sold	2170000/7.80
Total Units Sold	278,205