Outdoor Charlie’s is introducing a new fishing pole, and is trying to decide wha

Question

Outdoor Charlie’s is introducing a new fishing pole, and is trying to decide what to charge for it. The company has already determined that the optimal markup on the unit product cost is 50%. Cost information is provided below.
Per Unit Total
Direct Materials $10.00
Direct Labor $3.00
Variable Manufacturing Overhead $4.00
Fixed Manufacturing Overhead $150,000
Variable Selling and Admin. Expense $1.00
Fixed Selling and Admin. Expense $90,000

Calculate the selling price based on a planned production of $12,000 units. Round your answer to two decimal places.

Explanation / Answer

Absorbtion cost method: Direct variable and direct fixed expenses Per Unit Total regarding 12,000 units: (10+3+4)=17.00 per unit x 12,000 units = 204,000 Add fixed amounts: 150,000+204,000=354,000 total expenses To add in the profit markup: 354,000 * .50 = 177,000 profit to add to expense 354,000 + 177,000 = 531,000 total sales 531,000 / 12,000 units = $44.25 per fishing pole Variable Costing Method: - only variable expenses Per Unit Total regarding 12,000 units: (10+3+4)=17.00 per unit x 12,000 units = 204,000 To add in the profit markup: 204,000 * .50 = 102,000 profit to add to expense 204,000 + 102,000 = 306,000 total sales 306,000 / 12,000 units = $25.50 per fishing pole

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