Required: Compute the company\'s total yearly fixed costs Calculate the budgeted

Question

Required: Compute the company's total yearly fixed costs Calculate the budgeted selling price per joystick assuming that the company uses a cost-plus pricing strategy and a profit markup equal to 30 percentage of total manufacturing cost per unit. Using the selling price per joystick calculated in part (b), calculate the company's contribution margin per unit. Using the selling price you calculated in part (b), calculate the company's breakeven point in units and sales dollars. Estimate the company's profit in dollars if it sells 19,000 joysticks.

Explanation / Answer

Answers

a) It is given in the question that production is 24000 units

and

Fixed Manufacturing Overhead is $2 per unit and fixed selling and administrative cost is $8 per unit , so total fixed cost

= (8+2)*24000

= $240,000

b) Total Manufacturing cost = (15+23+10+2) = $50 Per unit

30% Mark up means = 50*30% = $15

So , Budgeted selling price = Total cost + Mark up

   = 60+15

   = $75

c) Contribution margin per unit

= Sales Price PU - Variable cost PU

= $75 - (15+23+10+2)

= $25 PU

d) Breakeven point in unit = Total fixed cost/Contribution margin PU

   = $240,000/$25

   = 9600 Units

Breakeven point in Sales $ = 9600*75

= $720,000

e) Company's profit at 19,000 units

= ($25*19000) - $240,000

= $235,000

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