Oregon Equipment Company wants to develop a new log-splitting machine for rural

Question

Oregon Equipment Company wants to develop a new log-splitting machine for rural homeowners. Market research has determined that the company could sell 6,000 log-splitting machines per year at a retail price of $700 each. An independent catalog company would handle sales for an annual fee of $2,000 plus $50 per unit sold. The cost of the raw materials required to produce the log-splitting machines amounts to $80 per unit.

If company management desires a return equal to 10 percent of the final selling price, what is the target conversion and administrative cost per unit? Round answer to the nearest cent.

$Answer

Explanation / Answer

Target conversion and administrative cost per unit = Sell Price - Annual Fee/No of log splitting machine - handling cost per unit - raw material cost - Target profit

Target conversion and administrative cost per unit = 700 - 2000/6000 - 50 - 80 - 10%*700

Target conversion and administrative cost per unit = $ 499.67

Answer

Target conversion and administrative cost per unit = $ 499.67

Related Questions

Navigate

• Browse (All)
• Browse O
• Subjects

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