1.
Introduction: The incremental profit earned on sales of each unit as a result of all associated variable cost being deducted from the price of the product is termed as the contribution margin.
To calculate: The unit product cost for remodeled product.
1.
Answer to Problem 6A.12P
Total unit production cost $28
Explanation of Solution
Fixed manufacturing:
| Particular | |
| Direct material cost | 12 |
| Direct labor | 8 |
| Variable manufacturing OH | 3 |
| Fixed manufacturing OH | 5 |
| Total Unit product cost | 28 |
Total unit production cost $28
2.
Introduction: The incremental profit earned on sales of each unit as a result of all associated variable cost being deducted from the price of the product is termed as the contribution margin.
To calculate: The markup percentage on absorption cost for the remodeled
2.
Answer to Problem 6A.12P
Mark up percentage is 37.5%
Explanation of Solution
Required
Product margin:
Product margin per unit:
Markup percentage:
Mark up percentage is 37.5%
3.
Introduction: The incremental profit earned on sales of each unit as a result of all associated variable cost being deducted from the price of the product is termed as the contribution margin.
The Selling price company should establish mark up percentage on absorption cost.
3.
Answer to Problem 6A.12P
Thus required selling price is 38.5
Explanation of Solution
Required selling price:
Thus required selling price is 38.5
4.
Introduction: The incremental profit earned on sales of each unit as a result of all associated variable cost being deducted from the price of the product is termed as the contribution margin.
The
4.
Answer to Problem 6A.12P
Return on investment is 18.45 %
Explanation of Solution
| Particular | Amount |
| Sales | 731500 |
| Less: COGS | 532000 |
| Gross margin | 199500 |
| Less: Selling expense | 79000 |
| Income | 120500 |
Return on investment is 18.45 %
5.
Introduction: The incremental profit earned on sales of each unit as a result of all associated variable cost being deducted from the price of the product is termed as the contribution margin.
The revised selling price at lower sales level.
5.
Answer to Problem 6A.12P
new price is 40.5
Explanation of Solution
Required rate of return:
Product margin:
Product margin per unit:
Markup percentage:
| Particular | Amount |
| Net earning | 120500 |
| Target net earning | 130000 |
| Differential earning | 9500 |
| Number of units | 19000 |
| Price to be increased by: | 2 |
| Old price | 38.5 |
| New price | 40.5 |
Thus new price is 40.5
6.
Introduction: The incremental profit earned on sales of each unit as a result of all associated variable cost being deducted from the price of the product is termed as the contribution margin.
The revised selling price and profit at lower sales level
6.
Answer to Problem 6A.12P
Optimal selling price is $41.58, profit on optimal selling price is $179020. The increase in the price of the product will be recommended as the company is earning more profit even if the sales is decreasing
Explanation of Solution
- Optimal selling price:
- Profit on optimal selling price:
| Particular | Amount |
| Sales | 790020 |
| Less: COGS | 532000 |
| Gross margin | 285020 |
| Less: Selling expense | 79000 |
| Income | 179020 |
The increase in the price of the product will be recommended as the company is earning more profit even if the sales is decreasing
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