High Tech Bhd manufactures a specialized equipment that is used in scientific research and practice. The followings are the production cost information for the specialized equipment: А. RM Production cost: Direct materials 680,000 Direct Labour 500,000 Variable overhead 190,000 Fixed overhead 270,000 Administrative cost: Variable 250,000 Fixed 320,000 Selling and distribution cost: Variable 20,000 Fixed 130,000 The production manager of the High Tech Bhd has suggested that a profit margin of 25% on full cost should be charged for every product sold. However, the marketing manager of the company commented that fixed costs are considered as unavoidable and they should be excluded when setting prices for the product. He further suggested that price should be set total variable cost plus 50%. At present, the normal sales volume is 200,000 units. Required: Calculate the selling price of the specialized equipment: a. i. according to the suggestion of the production manager ii. according to the proposal of the marketing manager b. Explain which selling price that would you suggest to be adopted by High Tech Bhd.

High Tech Bhd manufactures a specialized equipment that is used in scientific research and practice. The followings are the production cost information for the specialized equipment: А. RM Production cost: Direct materials 680,000 Direct Labour 500,000 Variable overhead 190,000 Fixed overhead 270,000 Administrative cost: Variable 250,000 Fixed 320,000 Selling and distribution cost: Variable 20,000 Fixed 130,000 The production manager of the High Tech Bhd has suggested that a profit margin of 25% on full cost should be charged for every product sold. However, the marketing manager of the company commented that fixed costs are considered as unavoidable and they should be excluded when setting prices for the product. He further suggested that price should be set total variable cost plus 50%. At present, the normal sales volume is 200,000 units. Required: Calculate the selling price of the specialized equipment: a. i. according to the suggestion of the production manager ii. according to the proposal of the marketing manager b. Explain which selling price that would you suggest to be adopted by High Tech Bhd.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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