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    Applying the Regression Model

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    1. During its first year of operations, ABC Company paid $23,000 for direct materials and $18,500 for production workers' wages. Indirect manufacturing costs on the production facilities amounted to $16,500 while general, selling, and administrative expenses totaled $3,000. The company produced 16,000 units and sold 14,000 units at a price of $8.50 a unit.

    What is the average cost per unit manufactured?

    2. The following information is for a product manufactured and sold by XY company

    Sales price per unit, $35
    Variable cost per unit, $20
    Total fixed costs, $300,000
    Last year, Rivera earned a profit of $30,000.
    Required:
    (a) How many units did XY sell last year?

    (b) XY's managers are considering decreasing the sales price to $30 in an effort to increase market share. Also, the company wants a profit of $80,000. How many units would it have to sell at the lower selling price to achieve this target?

    3. The DEF Company makes and sells two products, as follows:

    The DEF Company expects to incur annual fixed costs of $175,000. The relative sales mix of the products is 75% of A and 25% of unit of B.
    Required:

    1) Determine the total number of units of products (A and B combined) that Pargo must sell to break even.

    2) What is the number of units of A and of B that Pargo would expect to sell at the break-even point?
    thank you

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    https://brainmass.com/business/financial-ratios/unit-costs-sales-and-break-even-point-415444

    Solution Preview

    1. During its first year of operations, ABC Company paid $23,000 for direct materials and $18,500 for production workers' wages. Indirect manufacturing costs on the production facilities amounted to $16,500 while general, selling, and administrative expenses totaled $3,000. The company produced 16,000 units and sold 14,000 units at a price of $8.50 a unit.

    What is the average cost per unit manufactured?

    Cost per unit $23,000 / 16000 1.44 each
    Each labor 18,500 / 16,000 1.16 each labor
    indirect 16,500 / 16,000 1.03 each
    Admin 3,000 / 16,000 .19 each

    $61,000 / $16,000 = $3.82 average cost

    Answer: 3.82

    8.50 ea - 3.82 = $4.68 average profit
    $8.50 x 14,000 = $119,000 gross revenue
    $119,000 - $61,000 = $58,000 profit ...

    Solution Summary

    The following problem helps calculate average cost per unit, number of units sold, and break even point.

    $2.19