Question

ABC Company designs a new four slots toaster that can be adjusted to the various thickness of bread and bagel. The pricing plan for the new toaster:

Target price $97.50

The company requires new products be priced such that 30% of the price is profit.

Required

a. Compute amount of desired profit per unit of new taster

b. Compute target cost per unit of new toaster

ABC Company manufactures three types of filing boxes. Each type
requires the use of a special machine that has a limited capacity each year.
Information on the three types of storage units is as follows:
Special machine capacity			18,000
		Basic	Standard
Selling price		$         10.80	$         36.00
Variable cost		$           7.20	$         24.00
Machine hours required		0.12	0.60
The company believes that it can sell as many units as it can produce for each
type of the products.

c. Compute number of each type of products to be produced to maximuze company's contribution margin

Answer 1

Target price (selling price) of the new toaster is $97.50.

As per question, the price of the product should be such that 30% of the price is profit. It implies that 70% of the price would be the cost of making.

Cost price + Profit = Selling Price

a) Desired profit of the toaster would be 30% of $97.50

=> 30/100 x 97.50

=> $29.25

b) Since we have target price and desired profit, we can find the target cost by subtracting the profit from price.

Target cost = Target price - Target profit

=> Target cost = 97.50 - 29.25 = $ 68.25

c) More information is required for answering this part since the machine hours required is only given for two types of filing boxes.