Most manufacturing companies have gross margin goals, and orioles is no different. Oriole'smakes lightweight backpacks that are suitable for a number of purposes. Management at thecompany has dictated a strict 60% gross margin goal, and to date it has been able to achieveit. some of the company's financial information is as follows: SALES $600,000, VARIABLESELLING EXPENSE $3.50/UNIT, FIXED SELLING, GENERAL AND ADMINISTRATIVE EXPENSE$121,000. IF THE FIXED PORTION OF ORIOLES MANUFACTURING COST IS $100,000,WHAT COMBINATION OF SELLING PRICE AND VARIABLE MANUFACTURING COST WOULDFIT THE CORPORATE GROSS MARGIN PERCENTAGE GOAL ASSUMING SALES VOLUME IS20,000 UNITS?S

Step 1:Gross profit is difference between sales price and cost of goods sold. Cost of goods sold…

Answered: Most manufacturing companies have gross…

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter11: Differential Analysis And Product Pricing

Section: Chapter Questions

Problem 16E

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Most manufacturing companies have gross margin goals, and Murphy's is no different. Murphy's makes lightweight backpacks that are suitable for a number of purposes. Management at the company has dictated a strict 60% gross margin goal, and, to date, it has been able to achieve it. Some of the company's financial information is as follows. Sales $ 625,000 Variable selling expenses $ 2.50/unit Fixed selling, general, and administrative expenses $ 120,000 Questions: a. Given the above information, what is the most Murphy's can incur in manufacturing costs and still meet its gross margin goal? b. If the fixed portion of Murphy's manufacturing cost is $87,500, what combination of selling price and variable manufacturing costs would fit the corporate gross margin percentage goal, assuming sales volume is 25,000 units? c. Assume now that instead of having a corporate margin goal, the company switches to a contribution margin goal. If this new contribution margin goal…
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