A company makes one product, which has variable manufacturing costs of Rs. 3.25 per unit and variable selling and administrative costs of Rs. 1.17 per unit. Fixed manufacturing costs are Rs. 42,300 per month and fixed selling and administrative costs are Rs. 29.900 per month. The company wants to earn an average monthly profit of Rs. 15,000 and they expect to produce and sell an average of 40,000 units of the product per month. What is the minimum selling price management can be expected to set to meet their profitability goals
Answers
Answer:
42331.5575
Explanation:
Profit per unit = 15000/40000
= 0.375
Add variable cost
3.25 + 1.17
=4.42
Add the manufacturing costs and administrative costs
42300 + 29.900
42329.9
Total output quantity x variable cost of each output unit = total variable cost
0.375 * 4.42
1.6575
Total variable cost + manufacturing and administrative cost
42331.5575
Answer:
6.60
Explanation:
Per unit variable manufacturing cost = 3.25
per unit variable selling and administrative cost =1.17
per unit fixed manufacturing cost = 42300 / 40000 =1.06
per unit fixed selling and administrative cost = 29900 / 40000 = 0.75
Total cost per unit = 3.25 + 1.17 + 1.06 + 0.75 = 6.23
Total cost = 6.23 x 40000 = 249200
Selling price = 249200 + 15000 = 264200
Selling price per unit = 264200 / 40000 = 6.60