Ionic Charge is a newly organized manufacturing business that plans to manufacture and sell 60,000 units per year of a new product. The following estimates have been made of the company's costs and expenses (other than income tax) Fixed Variable per unit Manufacturing costs Direct materials $25 Direct Labor 15 Manufacturing overhead $500,000 8 Period costs Selling expenses 2 Adminstrative expenses 300,000 Totals $800,000 $50 A. What should the company establish as the sales price per unit if it sets a target of earning an operating income of $700,000 by producing and selling 60,000 units during the first year of operations, B. At the unit sales price computed in Part A, how many units must the company produce and sell to break even? C. What will be the margin of safety if the comapny produces and sells 60,000 units at the sales price computed in part A.
Ionic Charge is a newly organized manufacturing business that plans to manufacture and sell 60,000 units per year of a new product. The following estimates have been made of the company's costs and expenses (other than income tax) Fixed Variable per unit Manufacturing costs Direct materials $25 Direct Labor 15 Manufacturing overhead $500,000 8 Period costs Selling expenses 2 Adminstrative expenses 300,000 Totals $800,000 $50 A. What should the company establish as the sales price per unit if it sets a target of earning an operating income of $700,000 by producing and selling 60,000 units during the first year of operations, B. At the unit sales price computed in Part A, how many units must the company produce and sell to break even? C. What will be the margin of safety if the comapny produces and sells 60,000 units at the sales price computed in part A.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Ionic Charge is a newly organized manufacturing business that plans to manufacture and sell 60,000 units per year of a new product. The following estimates have been made of the company's costs and expenses (other than income tax)
| Fixed | Variable per unit | |
| Direct materials | $25 | |
| Direct Labor | 15 | |
| Manufacturing |
$500,000 | 8 |
| Period costs | ||
| Selling expenses | 2 | |
| Adminstrative expenses | 300,000 | |
| Totals | $800,000 | $50 |
A. What should the company establish as the sales price per unit if it sets a target of earning an operating income of $700,000 by producing and selling 60,000 units during the first year of operations,
B. At the unit sales price computed in Part A, how many units must the company produce and sell to break even?
C. What will be the margin of safety if the comapny produces and sells 60,000 units at the sales price computed in part A.
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