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Normal selling price

Burtis Company produces a number of products. In 2002, the selling price of Product A, whose sales are normally 10,000 units per year, was calculated as follows:
Unit Costs
Direct Material Costs.............................$ 4.00
Direct labor costs.................................. 7.00
Overhead costs..................................... 4.80
Selling and administrative costs................. 3.50
Full Cost.............................................19.30
Profit (10% of full cost)........................... 1.93
Selling price........................................$21.23

In 2003, the company estimates that direct material cost and direct labor cost will increase by 12 percent. It also estimates that overhead cost will increase by a total of $6,000 and that selling and administrative cost and sales volume will remain unchanged.

What is the normal selling price for Product A in 2003?

Solution Preview

For 2003 we increase the costs as given to get the new price
Direct Material Costs.............................$ 4.48 (this will increase by 12% and so will be 4.00X1.12)
Direct labor ...

Solution Summary

The solution explains how to calculate the normal selling price

$2.19