Utah Utensil has developed a new kitchen. The firm has conducted significant mar

Question

Utah Utensil has developed a new kitchen. The firm has conducted significant market research and estimated the following pattern for sales of the new product:

Year            Expected Volume          Expected Price per Unit
1                   48,000 units                           $19
2                   48,000 units                            20
3                   90,000 units                            16
4                   40,000 units                            12

If the firm desires to net $3.50 per unit in profit over the life of the product, and selling and administrative expenses are expected to average $50,000 per year, what is the target cost to produce the new utensil?

Explanation / Answer

Year Expected Volume selling price Fixed cost per unit Profit Margin Target cost 1 48000 19 1.041666667 3.50 14.46 2 48000 20 1.041666667 3.50 15.46 3 90000 16 0.555555556 3.50 11.94 4 40000 12 1.25 3.50 7.25

Related Questions

Navigate

• Browse (All)
• Browse U
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.