Breed Products has performed extensive studies on its costs and production and estimates the following annual costs based on 150,000 units (produced and sold):

Total Annual Costs (150,000 units)

Direct Material $200,000

Direct Labor $180,000

Manufacturing overhead $150,000

Selling, general, and administrative $100,000

Total = $630,000

a) Compute Breed's unit selling price that will yield a profit of $600,000, given sales of 150,000 units

b) Compute Breed's dollar sales that will yield a projected 20% profit on sales, assuming variable costs per unit are 60% of the selling price per unit and fixed costs are $225,000

c) Management believes that a selling price of $9 per unit is reasonable given current market conditions. How many units must Breed sell to generate the revenues (dollar sales) determined in requirement (b) ?

Question

Turbo

Business

4 September, 18:57

Breed Products has performed extensive studies on its costs and production and estimates the following annual costs based on 150,000 units (produced and sold):

Total Annual Costs (150,000 units)

Direct Material $200,000

Direct Labor $180,000

Manufacturing overhead $150,000

Selling, general, and administrative $100,000

Total = $630,000

a) Compute Breed's unit selling price that will yield a profit of $600,000, given sales of 150,000 units

b) Compute Breed's dollar sales that will yield a projected 20% profit on sales, assuming variable costs per unit are 60% of the selling price per unit and fixed costs are $225,000

c) Management believes that a selling price of $9 per unit is reasonable given current market conditions. How many units must Breed sell to generate the revenues (dollar sales) determined in requirement (b) ?

+1

Answers (1)

Know the Answer?

Xander Singleton · Answer 1

(a) $8.20

(b) $1,125,000

(c) 125,000

Explanation:

(a) Unit selling price:

= (Total cost incurred + Desired profit) : Number of units sold

= ($630,000 + $600,000) : 150,000

= $8.20

(b) Profit = Dollar sales - Variable cost - Fixed cost

($ sales * 20% profit) = $ sales - ($ sales * 60%) - $225,000

($ sales * 20% profit) = ($ sales * 40%) - $225,000

$225,000 = ($ sales * 40%) - ($ sales * 20% profit)

$225,000 = ($ sales * 20%)

Dollar sales = $225,000 : 20%

= $1,125,000

(c) No. of units required to be sold:

= Dollar sales : Selling price per unit

= $1,125,000 : $9

= 125,000