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 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.
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.
COST TOTAL FIXED ELEMENT VARIABLE ELEMENT
Direct material 400,000 - 400,000
direct labor ...
Education
- B. Sc., University of Nigeria
- M. Sc., London South Bank University
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