Question

The chief engineer at Future Tech has proposed production of a high-tech portable electronic storage device to be sold at a 30 percent markup above its full cost. Management estimates that the fixed costs per year will be $180,000, and the variable cost of the storage device will be $10 per unit.

Required
a. Assuming sales of 60,000 units, what is the full cost of a storage device, and what is the price with a 30 percent markup?
b. Assume that the quantity demanded at the price calculated in part a is only 40,000 units. What is the full cost of the storage device, and what is the price with a 30 percent markup?
c. Compare the selling prices computed in parts a and b; does the selling price increase, decrease, or stay the same when the number of units produced and sold decreases? Why does this change occur?



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  • CreatedSeptember 23, 2013
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