Question

1. Corrientes Company produces a single product in its Buenos Aires plant that currently sells for 5.30 p per unit. Fixed costs are expected to amount to 52,000 p for the year, and all variable manufacturing and administrative costs are expected to be incurred at a rate of 2.40 p per unit. Corrientes has two salespeople who are paid strictly on a commission basis. Their commission is 9 percent of the sales revenue they generate. (Ignore income taxes.) (p denotes the peso, Argentina’s national currency. Many countries use the peso as their national currency. On the day this exercise was written, Argentina’s peso was worth $0.104 U.S. dollar.)

Suppose management alters its current plans by spending an additional amount of 4,300 p on advertising and increases the selling price to 6.30 p per unit. Calculate the profit on 62,000 units. (Do not round intermediate calculations. Enter your answer in pesos.)

Profit: ____________ p

The Sorde Company has just approached Corrientes to make a special one-time purchase of 12,000 units. These units would not be sold by the sales personnel, and, therefore, no commission would have to be paid. What is the price Corrientes would have to charge per unit on this special order to earn additional profit of 14,400 p? (Do not round intermediate calculations. Round your answer to 2 decimal places. Enter your answer in pesos.)

Sales price required: ________ p per unit

Answer 1

Ques 1 ) Profit = 150346p

Income From sales = 62000 units * 6.30p = 390600

Costs = Fixed cost + Variable manufacturing & admin costs
+ sales commission+ additional selling exp

= 52000p + 2.4p*62000 units + 9%*(62000 units * 6.30p) + 4300p

= 52000 + 148800 + 35154 + 4300

= 240254

Profit = Income – Cost

= 390600 – 240254

= 150346p

Ques 2 ) Sales price per unit = 8.29p

Profit = Income – Cost

= 14400p = (12000 units * price ) – (52000p + 2.4p*12000 units + 4300)

= 14400 = 12000price – 85100

= 14400 + 85100 = 12000 price

= 99500/12000 = price

= 8.291667 = price

So, price = 8.29

NOTE : We add advertising expenses as they are fixed.

Pls Upvote. Thanks :)