3.2) A company has $25 per unit in variable costs and $1,000,000 per year in fix
ID: 2665784 • Letter: 3
Question
3.2) A company has $25 per unit in variable costs and $1,000,000 per year in fixed costs. Demand is estimated to be 100,000 units annually. What is the price if a markup of 40% on total cost is used to determine the price?3.4) A manufacturing company produces and sells 20,000 units of a single product. Total production costs are $14/unit. If the total sales are $560,000 what mark up percentage is the company using?
3.5) A company has a total cost of $50.00 per unit at a volume of 100,000 units. The variable cost per unit is $20.00. What would the price be if the company expected a volume of 120,000 units and used a markup of 50%?
3.9) A Shavon company has total fixed costs of $6,000,000 and total variable cost of $3,000,000 at a volume level of 300,000 units. What price would be charged if the company used cost plus pricing and a markup of 25%?
Explanation / Answer
3.2) Mark-up:
Total Var cost = No of Units * VC pu = 100,000 * 25 = $2,500,000
Fixed cost = $1,000,000
Total Cost = $3,500,000
Now Cost x (Markup + 1) = Sale price
So Sale price = 3,500,000*(40%+1) = 3,500,000*(1.40) = $4,900,000
So Sale price pu = $5180,000/100,000 = $49.00
3.4) 100%:
= (sales - cost) / cost
= (560,000 - 20,000*14) / (20,000*14)
= 100%
3.9) Total Costs = Fixed cost + Var cost = $6,000,000 +$3,000,000 = $9,000,000
Therefore, per unit cost = $9,000,000/300,000 units = $30 pu
Now we have SP = Cost + Markup(Cost) = $30 + 25%*$30 = $37.50
So company should charge $37.50 per unit
I have already answered two more questions in a post than I should! :D
Rate this properly and I will be happy to look at 3.5 and the remainder of your problems! Remember, technically, it should be one question per post, so I have still answered three of your four! Keep them coming, just one per post. Thanks!
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