Question

Fixed costs are $3,000, variable costs are $5 per unit. The company will manufacture 100 units and chart a 50% markup. Using the cost-plus pricing method, what will the selling price be? (2 pts)
Your company has fixed costs of $150,000 per year. The variable costs per unit in 2018 were $3 per unit, and 30,000 units were produced that year. Your company uses cost-based pricing and has a profit margin of $3 per unit. In 2019, production increased and your team had more experience—variable costs went down to $2 per unit because of your team’s higher skill and 65,000 units were produced that year. What is the change in selling price from 2018 to 2019? (2 pts)
Fixed Costs are $500,000. Per unit costs are $75, and the proposed price is $200. How many units must be sold to break even? How many units must be sold to realize a $200,000 target return? (2 pts)
Congratulations! You you just decided to become the proud owner of a new food truck offering traditional Mediterranean cuisine. Kitchen and related equipment costs are $100,000. Other fixed costs include salaries, gas for the truck, and license fees and are estimated to be about $50,000 per year. Variable costs include food and beverages estimated at $6 per platter (meat, rice, vegetable, and pita bread). Meals will be priced at $10.

Answer 1

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