Durant Manufacturers has performed extensive studies on its costs and production and estimates the following annual costs based on 150,000 units (produced and sold):
Total Annual
Costs
(150,000 units)
Direct material . . . . . . . . . . . . . . . . . . . . . . . . . . $300,000
Direct labor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 270,000
Manufacturing overhead . . . . . . . . . . . . . . . . . . 225,000
Selling, general, and administrative . . . . . . . . . . 150,000
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $945,000
Required
a. Compute Durant’s unit selling price that will yield a profit of $300,000, given sales of 150,000 units.
b. Compute Durant’s dollar sales that will yield a projected 20 percent profit on sales, assuming variable costs per unit are 60 percent of the selling price per unit and fixed costs are $420,000.
c. Management believes that a selling price of $8 per unit is reasonable given current market conditions. How many units must Durant sell to generate the revenues (dollar sales) determined in requirement (b)?