GJO Corp. manufactures decorative, high-quality nutcrackers. Selling price of a nutcracker is full production cost plus 25
Question:
GJO Corp. manufactures decorative, high-quality nutcrackers. Selling price of a nutcracker is full production cost plus 25 percent (rounded to the nearest dollar). Variable production cost is $55 per unit, and total fixed costs are $2,600,000. Fixed manufacturing costs are 80 percent of total fixed costs and are allocated to the product based on the number of units produced. Variable selling and administrative costs are 8 percent of sales. Variable and fixed costs are expected to increase by 15 and 7.5 percent, respectively, next year. Estimated production and sales are 400,000 units.
a. What is the expected full production cost per unit of GJO Corp.’s nutcrackers for next year?
b. What is the product’s expected selling price?
c. What is budgeted income before tax using the selling price computed in (b)?
d. What is the required selling price (rounded to the nearest dollar) for the company to earn income before tax equal to 25 percent of sales?
Step by Step Answer:
Cost Accounting Foundations and Evolutions
ISBN: 978-1111626822
8th Edition
Authors: Michael R. Kinney, Cecily A. Raiborn