Rosario Company produces a single product in its Buenos Aires plant, which curre
ID: 2451173 • Letter: R
Question
Rosario Company produces a single product in its Buenos Aires plant, which currently sells for 5.60 p per unit. Fixed costs are expected to amount to 51,000 p for the year, and all variable manufacturing and administrative costs are expected to be incurred at a rate of 2.80 p per unit. Rosario has two salespeople who are paid strictly on a commission basis. Their commission is 8 percent of the sales dollars they generate. (Ignore income taxes.) (p denotes the peso, Argentina’s national currency. Many countries use the peso as their national currency. On the day this exercise was written, Argentina’s peso was worth .1886 U.S. dollars.)
Suppose management alters its current plans by spending an additional amount of 4,700 p on advertising and increases the selling price to 6.60 p per unit. Calculate the profit on 64,000 units.
The Salente Company has just approached Rosario to make a special one-time purchase of 14,000 units. These units would not be sold by the sales personnel, and, therefore, no commission would have to be paid. What is the price Rosario would have to charge per unit on this special order to earn additional profit of 37,800 p?
Suppose management alters its current plans by spending an additional amount of 4,700 p on advertising and increases the selling price to 6.60 p per unit. Calculate the profit on 64,000 units.
The Salente Company has just approached Rosario to make a special one-time purchase of 14,000 units. These units would not be sold by the sales personnel, and, therefore, no commission would have to be paid. What is the price Rosario would have to charge per unit on this special order to earn additional profit of 37,800 p?
Explanation / Answer
1. Calculation of profit on 64000 units
2.
CHarge per unit to earn additional profit of 37800 p
Since commission is not to be paid on these order and fixed cost and advertising expense are already incurred therefore decision is based on variable cost.
Variable cost per unit = 2.80 p per unit
Per unit additional profit = 37800 p/14000 units = 2.7 p per unit
price Rosario would have to charge per unit on this special order to earn additional profit of 37,800 p = 2.8 p + 2.7 p = 5.5 p per unit
Sales (64000 * 6.6 p) (A) 422400 p Less: Variable cost (64000 * 2.8 p) 179200 p Fixed cost 51000 p Commission (Sales in dollars * 8% i.e. 422400*0.1886*8%) 6373.17 p Additional amount on advertising 4700 p Total cost (B) 241273.17 p Profit (A) - (B) 181126.83 pRelated Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.