{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Session 16 Solutions

# Session 16 Solutions - Example(P12-24 from the text...

This preview shows pages 1–6. Sign up to view the full content.

Example: (P12-24 from the text) Waterbury Inc., manufactures and sells RF17, a specialty raft used for whitewater rafting. In 2007, it reported the following: 20% Rate of return on investment \$300 Full cost per unit \$2,400,000 Investment 50% Markup on variable cost 20,000 Units produced and sold

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
1) What was the selling price for 2007? 300 Full cost per unit \$324 Selling price per unit \$ 24 = 20,000 = 2,400,000 x 20% Income earned in 2007 per unit 2) What was the percentage markup on full cost? 8% 300 = 24 = Percentage markup on full cost Cost-Plus Pricing Remember Price = Cost + Profit
3) What was the variable cost per unit? (1.5) \$216 = 324 = V = 324 V x (1 + 0.5) = P Percentage markup on variable cost = 50%

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
Target Pricing Waterbury is considering raising its selling price to \$348. However, at this selling price, its sales volume is predicted to fall by 10%. If Waterbury’s cost structure (total fixed costs and variable costs per unit) remain unchanged, should it raise its selling price? a) Determine Waterbury’s total fixed costs: \$1,680,000 Total fixed costs \$ 84 Fixed cost per unit 20,000 Units produced & sold 216 Variable cost per unit \$300 Full cost per unit
b) Estimate Waterbury’s profit at a selling price of \$348:

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### Page1 / 6

Session 16 Solutions - Example(P12-24 from the text...

This preview shows document pages 1 - 6. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online