Question 5 7 I have no idea about what I should do Question

ChI1TeamAssignment#1 The following are the Class Company\'s unit costs of manufacturing and marketing a high-style pen at an output level of 20,000 units per month: Manufacturing cost $1.00 Direct materials Direct manufacturing labor Variable manufacturing overhead cost Fixed manufacturing overhead cost 1.20 0.80 0.50 $l0,ooo Marketing cost Variable Fixed 1.50 0.90 $18.000 The following situations refer only to the preceding data; there is no connection between the situations. Unless stated otherwise, assume a regular selling price of $6 per unit. Choose the best answer to each question. Show your calculations.

Solution

5.

Selling Price per unit to break even is $ 4.15*

*Manufacturing cost( 1.00 + 1.20 + 0.80 ) + shipping cost ( 0.75 ) + Fixed cost for obtaining the order (0.25 )

- these are the relevant cost for the contract

- Fixed manufacturing cost was the sunk cost/past cost/historical cost which not relevant for the contract

- Marketing cost will not occur for this contract

6. Minimum Selling Price is $ 4.50

Relevant cost is the cost which will occur due to acceptance of offer or any contract or we can say which is relevant for the contract

Relevant Manufacturing Cost - .4.50{( DM 1.00 + DL 1.20 + Variable OH 0.80 ) + ( Variable Marketing Cost 1.50 )}

and Fixed cost is a  Sunk Cost which is not relevant.

7. Price per unit which able to pay is $ 5.35

Operating Profit as per the data -{SP i.e. $6 - Manufacturing cost (3.5) + Marketing Cost ( 2.40)}

Operating Profit - 0.10

Variable Marketing cost 1.50 - 20% = 1.20,,1.50 - 1.20 => 0.30

Fixed Manufacturing cost .50 * 50% = .25

Price that would the company be able to pay is 5.35 { 6-.65(.10 + .30 + .25 ) }