Bahrain Corporation makes a product with the following costs: Item Per...
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Accounting
Bahrain Corporation makes a product with the following costs:
Item
Per Unit
Per Year
Direct Materials
$91
Direct Labor
111.5
Variable Manufacturing Overhead
14.5
Fixed Manufacturing Overhead
6,480,000
Variable Selling and Administrative Expenses
8
Fixed Selling and Administrative Expenses
6,870,000
The company uses the absorption costing approach to cost-plus pricing. The pricing calculations are based on budgeted production and sales of 60,000 units per year. The company has invested $16,000,000 in this product and expects a return on investment of 15%.
Required:
- Compute the unit cost?
- compute the mark up percentage?
- Compute the selling price per unit?
- Assume that the company can produce and sell only 50,000 units, compute the net income or net loss?
- If you were the manager of this corporation, and you expected that strong competition next year, which pricing approach you will use? And Why?
Bahrain Corporation makes a product with the following costs:
Item | Per Unit | Per Year |
Direct Materials | $91 |
|
Direct Labor | 111.5 |
|
Variable Manufacturing Overhead | 14.5 |
|
Fixed Manufacturing Overhead |
| 6,480,000 |
Variable Selling and Administrative Expenses | 8 |
|
Fixed Selling and Administrative Expenses |
| 6,870,000 |
The company uses the absorption costing approach to cost-plus pricing. The pricing calculations are based on budgeted production and sales of 60,000 units per year. The company has invested $16,000,000 in this product and expects a return on investment of 15%.
Required:
- Compute the unit cost?
- compute the mark up percentage?
- Compute the selling price per unit?
- Assume that the company can produce and sell only 50,000 units, compute the net income or net loss?
- If you were the manager of this corporation, and you expected that strong competition next year, which pricing approach you will use? And Why?
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