The market price for a product has been $69 per unit, but competitive pressures have reduced the market price to $65. The firm manufactures 20,000 of these products per year at a manufacturing cost of $56 per unit (including $36 fixed cost and $20 variable cost per unit). Other selling and administrative costs for the product are $10 per unit. The firm ignores competitive prices because it has a differentiated product. It uses full manufacturing cost–based pricing with a 42% markup. What is the firm’s price?

The market price for a product has been $69 per unit, but competitive pressures have reduced the market price to $65. The firm manufactures 20,000 of these products per year at a manufacturing cost of $56 per unit (including $36 fixed cost and $20 variable cost per unit). Other selling and administrative costs for the product are $10 per unit. The firm ignores competitive prices because it has a differentiated product. It uses full manufacturing cost–based pricing with a 42% markup. What is the firm’s price?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

h
Jaybird Company operates in a highly competitive market where the market price for its product is $145 per unit. Jaybird desires a 30% profit per unit. Jaybird expects to sell 5,000 units. Additional information is as follows: Variable Costs per Unit Fixed Costs (total) Direct materials S 24 Overhead $ 45,000 Direct labor 25 General and administrative 18,000 Overhead 23 General and administrative 29 To achieve the target cost per unit, Jaybird must reduce total expenses by how much? Multiple Choice $ 62,000 $51,000 $70, 500 $67,500 $60, 500
[The following information applies to the questions displayed below.] Henna Company produces and sells two products, Carvings and Mementos. It manufactures these products in separate factories and markets them through different channels. They have no shared costs. This year, the company sold 44,000 units of each product. Income statements for each product follow. Sales Variable costs Contribution margin Fixed costs Income 3. Assume that the company expects sales of each product to increase to 58,000 units next year with no change in unit selling price. Prepare a contribution margin income statement for the next year (as shown above with columns for each of the two products). (Round "per unit" answers to 2 decimal places.) Contribution margin Income (loss) Carvings $ 774,400 464, 640 309,760 Mementos $ 774,400 154,880 619,520 187,760 497,520 $ 122,000 $ 122,000 HENNA COMPANY Contribution Margin Income Statement Carvings Units $ Per unit Total Mementos $ Per unit Total Total
Fresh Co. is a company that produces fruit juices. Variable Manufacturing Costs of one package of juice = $0.6, Variable Marketing and Administrative Cost = $0.4, Fixed Costs = $12,000, Sales Price per unit is $4. Which of the following is Fresh Co.’s Target Volume (in Sales dollars)? a) $12,000 b) $13,320 c)$16,000 d) $14,120
Meman
Valmont Company has developed a new industrial piece of equipment called the XP-200. The company is considering two methods of establishing a selling price for the XP-200-absorption cost-plus pricing and value-based pricing. Valmont's cost accounting system reports an absorption unit product cost for XP-200 of $9,300. Its markup percentage on absorption cost is 85%. The company's marketing managers have expressed concerns about the use of absorption cost-plus pricing because it seems to overlook the fact that the XP-200 offers superior performance relative to the comparable piece of equipment sold by Valmont's primary competitor. More specifically, the XP-200 can be used for 18,000 hours before replacement. It only requires $1,900 of preventive maintenance during its useful life and it consumes $165 of electricity per 900 hours used. These figures compare favorably to the competing piece of equipment that sells for $18,000, needs to be replaced after 9,000 hours of use, requires $3,800…
Valmont Company has developed a new industrial piece of equipment called the XP-200. The company is considering two methods of establishing a selling price for the XP-200-absorption cost-plus pricing and value -based pricing. Valmont's cost accounting system reports an absorption unit product cost for XP-200 of $ 9,400. Its markup percentage on absorption cost is 85%. The company's marketing managers have expressed concerns about the use of absorption cost- plus pricing because it seems to overlook the fact that the XP-200 offers superior performance relative to the comparable piece of equipment sold by Valmont's primary competitor. More specifically, the XP-200 can be used for 19,000 hours before replacement. It only requires $2,000 of preventive maintenance during its useful life and it consumes $170 of electricity per 950 hours used. These figures compare favorably to the competing piece of equipment that sells for $19,000, needs to be replaced after 9, 500 hours of use, requires…
Chalmers Corporation operates in multiple areas of the globe, and relatively large price changes are common. Presently, the company sells 183,800 units for $50 per unit. The variable production costs are $20, and fixed costs amount to $2,087,500. Production engineers have advised management that they expect unit labor costs to rise by 10 percent and unit materials costs to rise by 15 percent in the coming year. Of the $20 variable costs, 25 percent are from labor and 50 percent are from materials. Variable overhead costs are expected to increase by 20 percent. Sales prices cannot increase more than 12 percent. It is also expected that fixed costs will rise by 10 percent as a result of increased taxes and other miscellaneous fixed charges. The company wishes to maintain the same level of profit in real dollar terms. It is expected that to accomplish this objective, profits must increase by 8 percent during the year. Required: a. Compute the volume in units and the dollar sales level…
Couzen's Company’s cost structure is dominated by variable costs with a contribution margin ratio of 0.27 and fixed costs of $513,000. Every dollar of sales contributes 27 cents toward fixed costs and profit. The cost structure of a competitor, Jones & Family, is dominated by fixed costs with a higher contribution margin ratio of 0.77 and fixed costs of $2,650,500. Every dollar of sales contributes 77 cents toward fixed costs and profit. Both companies have sales of $4,275,000 annually. Required: Compare the two companies’ cost structures. Suppose that both companies experience a 12 percent decrease in sales volume. By how much would each company’s profits decrease?
Scholes Systems supplies a particular type of office chair to large retailers such as Target, Costco, and Office Max. Scholes is concerned about the possible effects of inflation on its operations. Presently, the company sells 81,000 units for $65 per unit. The variable production costs are $35, and fixed costs amount to $1,410,000. Production engineers have advised management that they expect unit labor costs to rise by 15 percent and unit materials costs to rise by 10 percent in the coming year. Of the $35 variable costs, 40 percent are from labor and 20 percent are from materials. Variable overhead costs are expected to increase by 20 percent. Sales prices cannot increase more than 10 percent. It is also expected that fixed costs will rise by 5 percent as a result of increased taxes and other miscellaneous fixed charges. The company wishes to maintain the same level of profit in real dollar terms. It is expected that to accomplish this objective, profits must increase by 7 percent…