Answer:
1. Using the cost-plus pricing method, the selling price = $5.25
2. The change in selling price from 2018 to 2019 is $3.69 or 33.5% reduction.
3. To break-even, unit sales = 4,000 units
To realize a target return of $200,000, the unit sales = 5,600 units
4. Units to break-even = 12,500 meals
Sales revenue at break-even point = $125,000
Step-by-step explanation:
a) Data and Calculations:
Fixed costs = $3,000
Variable costs per unit = $5
Units manufactured = 100 units
Total variable costs = $500 ($5 * 100)
Total costs = $3,500 ($500 + $3,000)
Cost per unit = $3.50
Markup percentage = 50%
Using the cost-plus pricing method, the selling price = $5.25 ($3.50 * 1.5)
b) Fixed costs per year = $150,000
Variable costs per unit = $3
Production units = 30,000
Total variable costs = $90,000 ($3 * 30,000)
Cost-based pricing with a profit margin = $3 per unit
Total costs = $240,000 ($90,000 + $150,000)
Cost per unit = $8 ($240,000/30,000)
Selling price per unit = $11 ($8 + $3)
Variable cost = $2 per unit
Production units = 65,000 units
Total costs = ($2 * 65,000 + $150,000)
= $280,000 ($130,000 + $150,000)
Unit cost = $4.31 ($280,000/65,000)
Selling price = $7.31 ($4.31 + $3)
Change in selling = $3.69 ($11 = $7.31) = 33.5%
c) Fixed costs = $500,000
Per unit costs = $75
Proposed price = $200
Contribution margin per unit = $125 ($200 - $75)
To break-even, unit sales = $500,000/$125 = 4,000 units
To realize a target return of $200,000, the unit sales = $700,000/$125 = 5,600 units
d) Kitchen and related equipment costs = $100,000
Other fixed costs per year = $50,000
Variable costs = $6 per platter
Price per meal = $10
Contribution margin per meal = $4 ($10 - $6)
Units to break-even = $50,000/$4 = 12,500 meals
Sales revenue at break-even point = $50,000/40% = $125,000
