Bench Industries manufactures large workbenches for industrial use. Recent market analysis indicates that sales are declining for
Question:
Bench Industries manufactures large workbenches for industrial use. Recent market analysis indicates that sales are declining for Bench's product because of aggressive competitor pricing. Bench's workbench sells for $800 per unit compared to the competition's comparable workbench sells for $700. Bench's marketing department determined that a price drop to $700 would be necessary to retain market share and continue with annual sales of 14,000 workbenches. The following data are for sales of 14,000 workbenches: Direct materials $3,563,000 Direct labor $975,000 Variable Overhead $400,000 Fixed Overhead $3,910,000 a. What is the current operating income as a percentage of revenue? b. If Bench Industries intends to maintain the same operating income percentage of revenue and lowers the price to $700 what is the target cost per unit?
Cost management a strategic approach
ISBN: 978-0073526942
5th edition
Authors: Edward J. Blocher, David E. Stout, Gary Cokins