Chapter 20 Assignment D Week 6

1. Suzanne Products Co. has predicted the following costs for this year for 150,000 units:

	Manufacturing	Selling and Administrative
Variable	$400,000	$100,000
Fixed	300,000	150,000
Total	$700,000	$250,000

Calculate the markup on variable costs needed to achieve a target profit of $125,000.

2. Build-It Co. has predicted the following costs for this year for 300,000 units:

	Manufacturing	Selling and Administrative
Variable	$ 400,000	$200,000
Fixed	600,000	600,000
Total	$1,000,000	$800,000

Calculate the manufacturing cost markup needed to obtain a target profit of $850,000.

3. Leo Corporation sells a product for $500 per unit. Its market share is 20 percent. The marketing manager believes that the market share can be increased to 30 percent with a reduction in price to $475. The product is currently earning a profit of $70 per unit. The president of Leo Corporation believes that the $70 profit per unit must be maintained.

Calculate the target cost per unit?

4. Oma Company has the following budgeted costs for 10,000 units:

	Variable Costs	Fixed Costs
Manufacturing	$400,000	$150,000
Selling & Administrative	200,000	50,000
Total	$600,000	$200,000

Required:

a. What is the markup on variable costs needed to break even?

b. What is the markup on variable costs needed to obtain a target profit of $150,000?

c. What is the markup on manufacturing costs needed to obtain a target profit of $250,000?

5.Washington Corporation sells a product for $400 per unit. Its market share is 35 percent of the units

sold. The marketing manager believes that the market share can be increased to 40 percent of the

units sold with a reduction in price to $350. The product is currently earning a profit of $60 per unit.

The president of Washington Corporation believes that his company needs to maintain the same profit

level per unit. The total market for the product has annual sales of 12,500 units.

Required:

a. How many dollars does Washington Corporation currently sell of the product each year?

b. What is the target price per unit?

c. What is the target cost per unit?