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1 November, 16:28

A Company manufactures coffee tables. The Company has a policy of adding a 20% markup to full costs and currently has excess capacity. The following information pertains to the company's normal operations per month: Output units 30,000 tables Machine-hours 6000 hours Direct manufacturing labor-hours 10,000 hours Direct materials per unit $50 Direct manufacturing labor per hour $12.00 Variable manufacturing overhead costs $322,500 Fixed manufacturing overhead costs $1,200,000 Product and process design costs $600,000 Marketing and distribution costs $1,290,000 For long-run pricing of the coffee tables, what price will most likely be used by the Company

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Answers (1)
  1. 1 November, 19:28
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    Answer: $201.30

    Explanation:

    To solve this all the expenses incurred per unit need to be included in the unit.

    Direct Materials $50

    Direct Manufacturing Labour Hours per unit

    = (10,000/30,000 units) * 12 (direct Manufacturing Labour per hour)

    = $4

    Variable Manufacturing Overhead Cost

    = 322,500/30,000

    = $10.75

    Fixed manufacturing overhead costs

    = 1,200,000/30,000

    = $40

    Product and process design costs

    = 600,000/30,000

    = $20

    Marketing and distribution costs

    = 1,290,000/30,000

    = $43

    Adding everything up,

    = 50 + 4 + 10.75 + 40 + 20 + 43

    = $167.75

    Company adds 20% to costs so,

    = 167.75 * (1 + 20%)

    = $201.30

    Company will most likely sell at $201.30
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