chester corporation is launching a new product that is expected to cost $75 in direct materials, $50 in direct labor, and $100 in variable overhead per unit. Fixed costs associated with the product are expected to be $500,000 each year the product is sold, and development and setup costs are expected to be $3,000,000. Chester expects to sell an average of 15,000 units a year over the product's 7 year life. Chester hopes to earn a profit of 10% of full costs. What price should be set for the product? Please show all work.
chester corporation is launching a new product that is expected to cost $75 in direct materials, $50 in direct labor, and $100 in variable overhead per unit. Fixed costs associated with the product are expected to be $500,000 each year the product is sold, and development and setup costs are expected to be $3,000,000. Chester expects to sell an average of 15,000 units a year over the product's 7 year life. Chester hopes to earn a profit of 10% of full costs. What price should be set for the product? Please show all work.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:chester corporation is launching a new
product that is expected to cost $75 in
direct materials, $50 in direct labor,
and $100 in variable overhead per
unit. Fixed costs associated with the
product are expected to be $500,000
each year the product is sold, and
development and setup costs are
expected to be $3,000,000. Chester
expects to sell an average of 15,000
units a year over the product's 7 year
life. Chester hopes to earn a profit of
10% of full costs. What price should be
set for the product? Please show all
work.
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