Question

Polar Industries makes refrigerators. Polars management wants to market refrigerators to students in dorm rooms and small apartments by making a compact refrigerator. The competition, led by Walmart, prices small refrigerators at $76 each. The production manager at Polar Industries estimates that the small refrigerator could be produced for the following manufacturing costs.
Direct materials $24
Direct labor 10
Manufacturing overhead 8
Total $42

Polar's management wants to make an operating margin of 10 percent (operating margin equals revenues minus manufacturing costs).

Suppose Polar uses cost-plus pricing, setting the price to manufacturing costs plus 10 percent of manufacturing costs, What price should it charge for the refrigerator?

Answer 1

Answer:

Selling price = $46.2

Explanation:

Cost plus pricing determines the price of the product by adding a given percentage of the cost to the manufacturing cost to arrive at the price.

Selling Price = Manufacturing Cost + (mark-up(%)×  manufacturing cost)

Selling price :

= 42 + (10%× 42)

= $46.2

Selling price  = $46.2