HW8 - E7 a The target cost per unit is \$1,600(\$2,000...

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Chapter 8 E4. Price Quantity Variable Cost per Unit Contribution Margin per Unit Total Contribution Margin Fixed Costs Profit 6.95 20,000 1.50 5.45 109,000 80,000 29,000 5.95 25,000 1.50 4.45 111,250 80,000 31,250 4.95 32,000 1.50 3.45 110,400 80,000 30,400 A price of \$5.95 yields the largest monthly profit. E5. Accepting the order will result in \$110,000 of incremental profit. Incremental revenue \$100 x 2,000 \$ 200,000 Incremental costs: Material \$25 x 2,000 \$ 50,000 Labor \$15 x 2,000 30,000 Variable overhead \$5 x 2,000 10,000 90,000 Incremental profit \$ 110,000 E6. a. Variable cost per unit \$ 50 Fixed costs per unit (100,000 ÷ 1,000) 100 150 Markup of 20% 30 Price \$ 180

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b. Variable cost per unit \$ 50 Fixed costs per unit (100,000 ÷ 500) 200 250 Markup of 20% 50 Price \$ 300 c. The company will not be able to sell 500 units at a price of \$300. After all, the company could only sell 500 units at a price of \$180.
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Unformatted text preview: E7. a. The target cost per unit is \$1,600 (\$2,000 – .2 (\$2,000)). b. If the product cannot be manufactured for \$1,600, the company should consider increasing the price or modifying features so that the target cost can be achieved. E8. Sales \$ 53,800 Less: Cost of good sold .9 x \$53,800 \$ 48,420 Order processing 200 x \$5.00 1,000 Rush handling .6 x 200 x \$8.50 1,020 Customer service 140 x \$10.00 1,400 Relationship management costs 2,000 53,840 Profitability of Johnson Brands account \$ (40) E9. a. Revenue Sales \$ 53,800 Order processing fee 200 x \$6 1,200 Rush order fee .6 x 200 x \$10 1,200 Customer service fee 140 x \$15 2,100 \$ 58,300 Total revenue Less costs: Cost of good sold .9 x \$53,800 \$ 48,420 Order processing 200 x \$5.00 1,000 Rush handling .6 x 200 x \$8.50 1,020 Customer service 140 x \$10.00 1,400 Relationship management costs 2,000 53,840 Profitability of Johnson Brands account \$ 4,460...
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HW8 - E7 a The target cost per unit is \$1,600(\$2,000...

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