Chapter 09 Income Statement Exercises and Problems Net sales for the year were $

Question

Chapter 09 Income Statement Exercises and Problems Net sales for the year were $1, 250,000 and cost of goods sold was $925,000 for the company's existing products. A new product is presently under development and will have an expected selling price of not more than $72 per unit in order to remain competitive with similar products in the marketplace. Required: Calculate gross profit and the gross profit ratio for the year. What is the maximum cost per unit that can be incurred to manufacture the new product so that the product can be priced competitively and will not result in a reduction to the company's gross profit ratio? (Do not round intermediate calculations and round your final answer to 2 decimal places.)

Explanation / Answer

sales 1250000 COGS 925000 Gross Profit 325000 Gross Profit Ratio 325000/125000 26.00% Selling price 72 Maximum manufacturing cost per Unit (1-.26)*72 53.28 Gross Profit 18.72

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