subject
Business, 18.06.2020 00:57 kellysmith45

The Solvents Division of the Somerset Corporation is one of many producers of a popular industrial solvent. During this past year they priced this product at $8/bottle. They arrived at this price by applying the directive from the corporate office that the Solvents Division should earn a net profit of at least $80,000 to their projection that 100,000 units would be sold during this past year. Their thinking can be summarized as follows: Projected unit sales 100,000
Revenue* $ 800,000
Variable costs** $300,000
Fixed costs $420,000
Net profit $80,000

*($8/unit * 100,000 units)
**($3/unit * 100,000 units)

The president of the Solvents Division is now making the pricing decision for the upcoming year. His current thinking can be summarized by the following quote: "This past year’s problem was that we didn’t do a good job of predicting sales. Now that we know that sales will be 80,000 units, we can price this product so we can make that $80,000 of net profit that the corporate office wants.

a. Compute the price per unit that is specified by the president's current thinking (you can assume that the past year's fixed costs and variable costs/unit are the same as those for the upcoming year).
b. Do you agree with the president's current thinking? Why, or why not? Is there a better way to go about setting the upcoming year's price?

ansver
Answers: 2

Other questions on the subject: Business

image
Business, 22.06.2019 07:10, Derienw6586
Walsh company manufactures and sells one product. the following information pertains to each of the company’s first two years of operations: variable costs per unit: manufacturing: direct materials $ 25 direct labor $ 12 variable manufacturing overhead $ 5 variable selling and administrative $ 4 fixed costs per year: fixed manufacturing overhead $ 400,000 fixed selling and administrative expenses $ 60,000 during its first year of operations, walsh produced 50,000 units and sold 40,000 units. during its second year of operations, it produced 40,000 units and sold 50,000 units. the selling price of the company’s product is $83 per unit. required: 1. assume the company uses variable costing: a. compute the unit product cost for year 1 and year 2. b. prepare an income statement for year 1 and year 2. 2. assume the company uses absorption costing: a. compute the unit product cost for year 1 and year 2. b. prepare an income statement for year 1 and year 2. 3. reconcile the difference between variable costing and absorption costing net operating income in year 1.
Answers: 3
image
Business, 22.06.2019 11:30, deedivinya
What would you do as ceo to support the goals of japan airlines during the challenging economics that airlines face?
Answers: 1
image
Business, 23.06.2019 00:00, Mypasswordishotdog11
Match each economic concept with the scenarios that illustrates it
Answers: 2
image
Business, 23.06.2019 00:10, gisset9
Mno corporation uses a job-order costing system with a predetermined overhead rate based on direct labor-hours. the company based its predetermined overhead rate for the current year on the following data: total estimated direct labor-hours 50,000 total estimated fixed manufacturing overhead cost $ 285,000 estimated variable manufacturing overhead per direct labor-hour $ 3.80 recently, job p123 was completed with the following characteristics: total actual direct labor-hours 20 direct materials $ 710 direct labor cost $ 500 the amount of overhead applied to job p123 is closest to:
Answers: 2
You know the right answer?
The Solvents Division of the Somerset Corporation is one of many producers of a popular industrial s...

Questions in other subjects: