The bill of materials for each product at Donald's Office Supply is very specific, right down to the number of casters needed for each office chair. Donald recognizes how important these documents are for planning purposes, but his operations managers appreciate them as well since they use this information to guide their material requisitions when it's time for production. Here are the budgeted product costs and selling prices, respectively, for the company's three key products: Product cost Selling Price Office chair $130 $229 Sit to Stand desk $215 $365 Printer stand $110 $205 Donald has fine-tuned all cost expectations for his products, and his selling prices are quite stable for each product, as well. So, to say Donald was surprised when his accountant reported significantly less profit margin than what he was expecting is the understatement of the year. According to the accountant, the difference is almost entirely attributable to the significant and recent increase in shipping costs for the company's raw materials. These higher freight costs caused a 20% increase to the budgeted product costs presented above. 1. How much of a reduction in gross margin did each product sustain after recognizing the higher costs? Office Chair Sit to stand desk Printer stand Gross margin pencentage ________________% ________________% ______________%
The bill of materials for each product at Donald's Office Supply is very specific, right down to the number of casters needed for each office chair. Donald recognizes how important these documents are for planning purposes, but his operations managers appreciate them as well since they use this information to guide their material requisitions when it's time for production.
Here are the budgeted product costs and selling prices, respectively, for the company's three key products:
Product cost Selling Price
Office chair $130 $229
Sit to Stand desk $215 $365
Printer stand $110 $205
Donald has fine-tuned all cost expectations for his products, and his selling prices are quite stable for each product, as well. So, to say Donald was surprised when his accountant reported significantly less profit margin than what he was expecting is the understatement of the year. According to the accountant, the difference is almost entirely attributable to the significant and recent increase in shipping costs for the company's raw materials. These higher freight costs caused a 20% increase to the budgeted product costs presented above.
1. How much of a reduction in gross margin did each product sustain after recognizing the higher costs?
Office Chair Sit to stand desk Printer stand
Gross margin pencentage ________________% ________________% ______________%
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