Exercise 2: Golden Manufacturers has performed extensive studies on its costs an

Question

Exercise 2: Golden Manufacturers has performed extensive studies on its costs and production and estimates the following annual costs based on 150,000 units (produced and sold). Total Annual Costs (150,000 units) Direct material $300,000 Direct labor 270,000 Manufacturing overhead 225,000 Selling, general, and administrative 150,000 Total $945,000 Required: a. Compute Golden’s unit selling price that will yield a profit of $300,000, given sales of 150,000 units. b. Compute Golden’s dollar sales that will yield a projected 20 percent profit on sales, assuming variable costs per unit are 60 percent of the selling price per unit and fixed costs are $420,000. c. Management believes that a selling price of $8 per unit is reasonable given current market conditions. How many units must Golden sell to generate the revenues (dollar sales) determined in requirement (b)?

Explanation / Answer

Ans:a Given Annual cost for 150000Units Direct Material 300000 Direct Labor 270000 Manufacturing OH 225000 Selling and adm 150000 total 945000 Sol1 sale(150000*8.3) 1245000 Less: VC 945000 Contribution 300000 less: FC 0 Profit(Given) 300000 Note: Sales= contribution+ Variable cost) sale price per unit= 1245000/150000=8.3 Ans B) Sales(150000*X) X Les:VC(150000*X*60% 90000*X Contribution X-X*90000 Less FC 420000 Profit 150000*X*20% Let sale price=X

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