Chill Industries specializes in the assembly of home appliances. One division focuses most of its efforts on assembling a convection toaster. Projected costs of this product follow.

The projected costs are based on an estimated demand of 600,000 convection toasters per year. The company wants to make a $1,923,000 profit.

Competitors have just published their wholesale prices for the coming year. They range from $21.60 to $22.64 per toaster. The Chill convection toaster is known for its high quality and modern look. It competes with products at the top end of the price range. Even with its reputation, however, every $0.20 increase above the top competitor€™s price causes a drop in demand of 60,000 units below the original estimate. Assume that all price changes are in $0.20 increments.

Required

1. Prepare a schedule of total projected costs and unit costs.

2. Use gross margin pricing to compute the anticipated selling price. (Round to two decimal places.)

3. Based on competitors€™ prices, what should the Chill toaster sell for (assume a constant unit cost)? Defend your answer. (Hint: Determine the total profit at various sales levels.)

4. Would your pricing structure in requirement 3 change if the company had only limited competition at its quality level? If so, in what direction? Explain why.

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Budgeted Costs Cost Description $ 960,000 Toaster casings Electrical components 2,220,000 3,600,000 Direct labor Variable indirect assembly costs Fixed indirect assembly costs Selling expenses General operating expenses 780,000 1,740,000 1,536,000 840,000 Administrative expenses 816,000