E21-24. Product Pricing: Two Products Assume Verbatim, a subsidiary of CMC Magnetics, manufactures two products, CDs and DVDs, both on the same assembly lines and packaged 30 disks per pack. The predicted sales are 150,000 packs of CDs and 500,000 packs of DVDs. The predicted costs for the year are as follows: Variable Costs Fixed Costs Materials ............................................ $4,000,000 $1,560,000 Other............................................... 2,000,000 2,052,500 CDs use 25% of the materials costs and 10% of the other costs. DVDs use 75% of the materials costs and 90% of the other costs. The management of Verbatim desires an annual profit of $450,000. Required a. What price should Verbatim charge for each disk pack if management believes the DVDs sell for twice the price of the CDs? The answer is CD:$8.75 per CD pack DVD=$17.5 per DVD pack. PLEASE SHOW ME STEP BY STEP CALCULATION HOW DO WE GET THIS ANSWER b. What is the total profit per product using the selling prices determined in part a? CD total profit $-482750 DVD total profit $932750 PLEASE SHOW ME STEP BY STEP CALCULATION HOW DO WE GET THIS ANSWER
E21-24. Product Pricing: Two Products Assume Verbatim, a subsidiary of CMC Magnetics, manufactures two products, CDs and DVDs, both on the same assembly lines and packaged 30 disks per pack. The predicted sales are 150,000 packs of CDs and 500,000 packs of DVDs. The predicted costs for the year are as follows:
Variable Costs Fixed Costs
Materials ............................................ $4,000,000 $1,560,000
Other............................................... 2,000,000 2,052,500
CDs use 25% of the materials costs and 10% of the other costs. DVDs use 75% of the materials costs and 90% of the other costs. The management of Verbatim desires an annual profit of $450,000. Required
a. What price should Verbatim charge for each disk pack if management believes the DVDs sell for twice the price of the CDs?
The answer is CD:$8.75 per CD pack DVD=$17.5 per DVD pack. PLEASE SHOW ME STEP BY STEP CALCULATION HOW DO WE GET THIS ANSWER
b. What is the total profit per product using the selling prices determined in part a?
CD total profit $-482750 DVD total profit $932750
PLEASE SHOW ME STEP BY STEP CALCULATION HOW DO WE GET THIS ANSWER
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