Ask Question
21 July, 17:22

The marketing manager of Griffin Corporation has determined that a market exists for a telephone with a sales price of $36 per unit. The production manager estimates the annual fixed costs of producing between 40,000 and 80,000 telephones would be $450,000. Required Assume that Griffin desires to earn a $150,000 profit from the phone sales. How much can Griffin afford to spend on variable cost per unit if production and sales equal 50,000 phones?

+5
Answers (1)
  1. 21 July, 17:50
    0
    The $18 per unit can Griffin afford to spend on variable cost per unit if production and sales equal 50,000 phones.

    Explanation:

    Since the net income equals to

    Contribution - Fixed cost = Net income

    where,

    Contribution = Sales - variable cost

    So, by using the above equation, the following information is given below:

    Sales price = $36 per unit

    Fixed cost = $450,000

    Net income = $150,000

    Units = 50,000 phones

    By using above information, we can calculate the contribution

    Contribution = Fixed cost + Net income

    = $450,000 + $150,000

    = $600,000

    Since, variable cost is not given. So we assume variable cost per unit be X.

    So,

    Units = Contribution amount : (Sale Price - Variable cost per unit)

    50,000 phones = $600,000 : ($36 - X)

    ($36 - X) = $600,000 : 50,000 phones

    So X would be $18 per unit

    Means, the variable cost is $18 per unit.

    Hence, $18 per unit can Griffin afford to spend on variable cost per unit if production and sales equal 50,000 phones.
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “The marketing manager of Griffin Corporation has determined that a market exists for a telephone with a sales price of $36 per unit. The ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers