Breed Products has performed extensive studies on its costs and production and e

Question

Breed Products has performed extensive studies on its costs and production and estimates the following annual costs based on 165,000 units (produced and sold):

Required:

a. Compute Breed’s unit selling price that will yield a profit of $560,000, given sales of 165,000 units. (Round your answer to 2 decimal places.)

b. Compute Breed’s dollar sales that will yield a projected 20 percent profit on sales, assuming variable costs per unit are 50 percent of the selling price per unit and fixed costs are $651,000.

c. Management believes that a selling price of $7.80 per unit is reasonable given current market conditions. How many units must Breed sell to generate the revenues (dollar sales) determined in requirement (b)? (Round your final answer to nearest whole unit.)

Total Annual Costs
(165,000 units) Direct material $ 282,000 Direct labor 255,000 Manufacturing overhead 216,000 Selling, general, and administrative 139,000 Total $ 892,000

Explanation / Answer

Solution A Description Amount Direct Material            282,000 Direct labor            255,000 Manufacturing overhead            216,000 Selling and general overhead            139,000 Required Profit            560,000 Requisite Sale proceeds        1,452,000 No of units            165,000 Unit Selling price                  8.80 Solution B Sale Price                   100 Profit                      20 Variable cost                      50 Contribution required to meet profit and fixed cost                      30 Fixed cost            651,000 Required Dollar Sale 651000/30% Required Dollar Sale        2,170,000 Solution C Total Dollar Sale        2,170,000 Unit Selling price                  7.80 Total Units Sold 2170000/7.80 Total Units Sold            278,205

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