Question Three: East Manufacturing Company was established in February, 2020 to produce and sell only product (X) as a start. The following costs were set by the internal experts of the company for product (X): Monthly fixed costs $750,000 Variable cost per unit $60 Monthly production 20,000 unit Based upon the above information, the management of the Company has set the following targets: Target selling price $150 per unit Monthly target profits $100,000 Requirement 1: Even though the level of competition is low, the president of the company is very concerned about the selling price of the product; he thinks that the price might be high, so he asked you (as a senior manager) to determine the lowest selling price that the company can sell all monthly production and achieve the target profit set by the internal experts. In March, 2020, the company decided to sell product (X) to one customer only. The following customers offered to purchase the following quantities from product (X). The offers are presented below: Offers received Quantity Price offered Customer A 19000 units $106 Customer B 15000 units $115 Customer C 17000 units $109 Customer D 20000 units $103 Requirement 2: The president of the company asked you to recommend which offer to accept from the above received offers knowing that the cost of storing one unit of product (X) will be $14.
Question Three:
East Manufacturing Company was established in February, 2020 to produce and sell only product (X) as a start. The following costs were set by the internal experts of the company for product (X):
- Monthly fixed costs $750,000
- Variable cost per unit $60
- Monthly production 20,000 unit
Based upon the above information, the management of the Company has set the following targets:
- Target selling price $150 per unit
- Monthly target profits $100,000
Requirement 1:
Even though the level of competition is low, the president of the company is very concerned about the selling price of the product; he thinks that the price might be high, so he asked you (as a senior manager) to determine the lowest selling price that the company can sell all monthly production and achieve the target profit set by the internal experts.
In March, 2020, the company decided to sell product (X) to one customer only. The following customers offered to purchase the following quantities from product (X). The offers are presented below:
|
Offers received |
Quantity |
Price offered |
|
Customer A |
19000 units |
$106 |
|
Customer B |
15000 units |
$115 |
|
Customer C |
17000 units |
$109 |
|
Customer D |
20000 units |
$103 |
Requirement 2:
The president of the company asked you to recommend which offer to accept from the above received offers knowing that the cost of storing one unit of product (X) will be $14.
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