The California Instruments Corporation, a producer of electronic equipment, make

Question

The California Instruments Corporation, a producer of electronic equipment, makes pocket calculators in a plant that is run autonomously.
The California Instruments Corporation, a producer of electronic equipment, makes pocket calculators in a plant that is run autonomously. The plant has a capacity output of 200,000 calculators per year, and the plant's manager regards 75 percent of capacity as the normal or standard output. The projected total variable costs for the normal or standard level of output are $900,000, while the total overhead or fixed costs are estimated to be 120 percents of total variable costs. The plant manager wants to apply a 20 percent markup on cost.
a. What price should the manager charge for the calculators?

Explanation / Answer

A.) $8.64 200,000 units * 75% = 150,000 untis a year 900,000 variable costs $900,000 * 20% = 180,000 so $1,080,000 fixed costs 20% markup, so $1,296,000 sales $1,296,000 / 150,000 units = $8.64 a unit

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