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Pearce Ltd has researched the price and features of a new product, BREC, to be...

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Accounting

Pearce Ltd has researched the price and features of a new product, BREC, to be developed. BREC will be priced at $1,000 to the final customer and the retailer expects a profit of 20% on selling price. A target profit of $200 per unit of BREC is expected. The company plans to produce and sell 120,000 units of BREC per year and has made preliminary costings per unit of BREC as follows:

  • Material 1: $230
  • Material 2: 4.6 pounds will be needed at $14 per pound. 8% of this material are wasted.
  • Production Labour: 5 hours at $20 per hour
  • Variable production overhead: $16 per production labour hour
  • Packaging and dispatch: $60

Marketing and customer support costs: They are estimated at $2,160,000 per year and are allocated based on units of BREC produced and sold.

Company overheads: Fixed production costs of $9,000,000 per year are allocated based on production labour hours.

Q11. The estimated total cost per unit of BREC is:

Question 11 options:

$632.50

$633

$622.20

$800

$600

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