Your costs if you make 2,800 parts are provided. You have the capacity to make an additional 2,800 parts for no additional increase in the fixed cost. Assuming you manufacture a total of 5,600 parts, what is the unit price you must charge if you desire a profit of $434,000? (Assume you will sell all 5,600 parts.)
Material (variable) : $158,000
Labor cost (variable) : $273,000
Administrative
variable : $76,000
fixed : $66,000
Overhead
variable : $111,000
fixed : $138,000
Cost Production of 2800 parts:
Material (variable) : $158,000
Labor cost (variable) : $273,000
Administrative
variable : $76,000
fixed : $66,000
Overhead
variable : $111,000
fixed : $138,000
Total: 822000
Cost of Producing another 2800 parts:
Material (variable) : $158,000
Labor cost (variable) : $273,000
Administrative
variable : $76,000
Overhead
variable : $111,000
Total : 618000
Fixed are not added for the next 2800 parts.
Grand Total cost = 822000 + 618000 = 1440000
Desired Profit = 434000
Hence Total Revenue should be = 1440000 + 434000 = 1874000
Per unit price = 1874000/5600 = 334.64
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