Product Pricing: Two Products Quality Data manufactures two products, CDs and DV
ID: 2449471 • Letter: P
Question
Product Pricing: Two Products
Quality Data manufactures two products, CDs and DVDs, both on the same assembly lines and packaged 10 disks per pack. The predicted sales are 400,000 packs of CDs and 500,000 packs of DVDs. The predicted costs for the year 2009 are as follows:
Each product uses 50 percent of the materials costs. Based on manufacturing time, 40 percent of the other costs are assigned to the CDs, and 60 percent of the other costs are assigned to the DVDs. The management of Quality Data desires an annual profit of $50,000.
(a) What price should Quality Data charge for each disk pack if management believes the DVDs sell for 20 percent more than the CDs? Round answers to the nearest cent.
CD's
DVD's
(b) What is the total profit per product using the selling prices determined in part (a)? Use negative signs with answers, if appropriate.
CD's
DVD's
Variable Costs Fixed Costs Materials $200,000 $500,000 Other $150,000 $600,000Explanation / Answer
Let the selling price of CD be "X" and DVD = X(1+.20) = 1. 20 X
Total Profit for quality data = Total sales - Total variable cost -Total fixed cost
50,000 = [(400,000 *X)for CD + (500000 *1.20X)for DVD] - [200000+150000] - [500000+600000]
50,000 = [400000X + 600000 X ] - 350000 - 1100000
50000 = 1000000X - 1450000
1000000X = 50000 +1450000
X = 1500000/1000000
= $ 1.5 per unit
CD(selling price) = 1.5 per CD pack
DVD (selling price ) = 1.5 *1.2 = 1.8 per DVD pack
b)
CD DVD sales 600,000 [400000*1.5] 900,000 [500000*1.8] less: material cost-Variable (100000) [200000*.5] (100000) [200000*.5] other -variable (60,000) [150,000*.4] (90000) [150000*.6] contribution 440000 710000 less:Material -Fixed (250000) [500000*.5] (250000) [500000*.5] other-fixed (240000) [600000*.4] (360000) [600000*.6] profit -50000 100000Related Questions
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