Mcquade Equipment is considering a new product for the road construction industry. The analyst has collected some information about the product design, summarized as follows:

The marketing group at Mcquade believes this product can be a success if sold at a price of $8,250 per unit. Mcquade desires an operating profit (as a percentage of costs) of 25 percent on products of this type. 

Required

a. Will Mcquade achieve its target operating profit based on these product characteristics?

b. A product engineer suggests that they are still uncertain about the direct material costs. By how much would direct material cost have to fall or by how much could they increase direct material cost per unit such that the desired operating profit would be met exactly?

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Prime cost per unit.... Conversion cost per unit Direct labor cost per unit. $5,600 2,800 1,200