Question

Breed Products has performed extensive studies on its costs and production and estimates the following annual costs based on 151,000 units (produced and sold):

	Total Annual Costs (151,000 units)
Direct material	$	298,000
Direct labor		258,000
Manufacturing overhead		209,000
Selling, general, and administrative		149,000
Total	$	914,000

Required:

a. Compute Breed’s unit selling price that will yield a profit of $596,000, given sales of 151,000 units. (Round your answer to 2 decimal places.)

b. Compute Breed’s dollar sales that will yield a projected 26 percent profit on sales, assuming variable costs per unit are 54 percent of the selling price per unit and fixed costs are $424,000.

c. Management believes that a selling price of $7.60 per unit is reasonable given current market conditions. How many units must Breed sell to generate the revenues (dollar sales) determined in requirement (b)? (Round your final answer to nearest whole unit.)

Answer 1

Req a:
Total cost of 151000 units			914000
Add: Desired profits			596000
Target sales in $			1510000
Divide: Number of units			151000
Unit Sellig price			10
Req b:
Fixed cost: 424000
Variable cost % of sales			54%
Profit % of sales			26%
Remaining % on sales for Fixed cost			20%
	(100-54-26)
Total saless in $: 424000 /20 *100 = $ 2120,000
Req c:
Total Sales revenue required			2120000
Divide: Selling price			7.6
Sales units required			278948	units