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    Product Pricing and Profit Analysis

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    Freedom, Inc., management had formed cost studies and projected the following annual cost based on 40,000 units of production and sales:
    total annual cost % of variable portion of total annual cost
    direct material $400,000 100%
    direct labor 360,000 75%
    manufacturing overhead 300,000 40%
    selling, general and administrative 200,000 25%

    1. Compute freedom's unit selling price that will yield a projected 10% profit on sales if sales are 40,000 unit

    2. Assume that management selects a selling price of $30 per unit. Compute freedom's dollar sales that will yield a projected 10% profit on sales assuming the above variable-fixed costs relationship are valid.

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    Solution Preview

    The objective, of the problem, is to determine the selling price and sales value after allowing for a profit margin.
    The profit margin is the difference between the cost price and the selling price.

    Direct material 400,000 - 400,000
    direct labor ...

    Solution Summary

    The solution contains a discussion and excel chart that determines the difference between the cost price and selling price. The excel information is given in the response below.