Homework SourseAssuming no direct factory overhead costs ie inventory carry
| Assuming no direct factory overhead costs (i.e., inventory carry costs) and $3 million dollars in combined promotion and sales budget, the Dim product manager wishes to achieve a product contribution margin of 35%. Given their product currently is priced at $35.00, what would they need to limit the material and labor costs to? | ||||||||
| Select: 1 | ||||||||
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| Assuming no direct factory overhead costs (i.e., inventory carry costs) and $3 million dollars in combined promotion and sales budget, the Dim product manager wishes to achieve a product contribution margin of 35%. Given their product currently is priced at $35.00, what would they need to limit the material and labor costs to? | ||||||||
| Select: 1 | ||||||||
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Solution
Desired contribution margin ratio = 35%
Selling price = $35 per unit
Contribution margin per unit = $35* 35% = $12.25 per unit
Variable cost = $35 - $12.25 = $22.75 per unit
Variable cost = Direct materials costs + Direct labor costs + Direct factory overheads
Direct factory overheads = 0
Direct materials costs + Direct labor costs = $22.75
Hence, Dim product manager need to limit the material and labor costs to $22.75
