Werner Company produces and sells disposablt foil baking pans to retailers for $

ID: 2900323 • Letter: W

Question

Werner Company produces and sells disposablt foil baking pans to retailers for $2.75 per pan. The variable cost per pan is a follows:

Direct materials $0.37

Direct labor 0.63

Variable factory overhead 0.53

Variable selling expense 0.12

Fixed manufacturing cost total $111,425 per year. Administrative cost (all fixed) totals $48,350.

a. What is the unit variable cost?

b. What is the unit variable manufacturing cost?

c. Which is used it cost-volume-profit analysis and why?

How many pans must be sold for Werner to earn operating income of $13,530?

How much sales revenue must Werner have to earn operating income of $13,530?

a) unit variable cost = 0.37 + 0.63 +0.53 +0.12 = 1.65 $

b) unit variable cost = 0.37 + 0.63 +0.53 = $ 1.53 (shouldnt include selling expenses)

c) profit per pan = $(2.75 - 1.65) = $ 1.10

total fixed costs = $ ( 111425 + 48350 ) = $ 159775

operating income = $ 13530

therefore total costs = $ (159775 + 13530 ) = $ 173305

units = 173305/1.10 = 157550

sales revenue = no.of units * sales expense = 157550*0.12 $ = $ 18906

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