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%
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.
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 ...
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.