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katrin2010 [14]
3 years ago
6

Andrews has a new design for their product Axe next round that can reduce their material cost of producing units from $8.13 to $

7.33. Andrew passes on one quarter of all cost savings by cutting the current price to customers. For simplicity: Current selling price = $19.00; Use current labor costs of $4.02; Use period costs of $7,260 (from Income Statement).
Required:
Determine the new selling price to break even next round.
Business
1 answer:
vredina [299]3 years ago
5 0

Answer:

$18.80

Explanation:

New selling price = Old selling price - Adjustments

Old selling price = $19.00, Adjustments = 1 quarter of reduced raw material costs difference

New selling price = $19.00 - ($8.13 - $7.33)/4

New selling price = $19.00 - $0.20

New selling price = $18.80

So, the new selling price to break even next round is $18.80.

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