Outdoor Charlie\'s is introducing a new fishing pole, and is trying to decide wh

Question

Outdoor Charlie's is introducing a new fishing pole, and is trying to decide what to charge for it. The company has already determined that the optimal markup on the unit product is 50%. Cost information is below:

Direct materials $10.00 (per unit)
Direct labor $3.00 (per unit)
Variable manufacturing overhead $4.00 (per unit)
Fixed manufacturing overhead $150,000 (total)
Variable selling and admin. expense $1.00 (per unit)
Fixed selling and admin. expense $90,000 (total)

Calculate the selling price based on a planned production of 12,000 units. Round to two decimal places.

Explanation / Answer

Base price: 10+3+4+1.50=$18.50 Unit overhead cost = (150000+90000)/12000=$20.00 Total cost price = 18.50+20.00=$38.50 Selling price = 38.50*1.50 = $57.75

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