1. Taurus Corporation sells a product for $500 per unit. Its market share is 20 percent. The marketing manager believes that the market share can be increased to 30 percent with a reduction in price to $450. The product is currently earning a profit of $70 per unit. The president of Taurus Corporation believes that the $70 profit per unit must be maintained. Calculate the target cost per unit?

2. Tank Manufacturing Company has the following budgeted costs for 10,000 units:

Variable Costs Fixed Costs

Manufacturing $200,000 $ 75,000

Selling & Administrative 100,000 25,000

Total $300,000 $100,000

Calculate the markup on variable costs needed to break even.

3. Tank Manufacturing Company has the following budgeted costs for 10,000 units:

Variable Costs Fixed Costs

Manufacturing $200,000 $ 75,000

Selling & Administrative 100,000 25,000

Total $300,000 $100,000

What is the initial selling price needed to obtain a target profit of $50,000 using the manufacturing cost markup method?

4. Nana Company has the following budgeted costs for 10,000 units:

Variable Costs Fixed Costs

Manufacturing $400,000 $150,000

Selling & Administrative 200,000 50,000

Total $600,000 $200,000

a. What is the markup on variable costs needed to break even?

b. What is the markup on variable costs needed to obtain a target profit of $100,000?

c. What is the markup on manufacturing costs needed to obtain a target profit of $200,000?

5. Wisconsin Corporation sells a product for $400 per unit. Its market share is 25 percent of the units sold. The marketing manager believes that the market share can be increased to 26 percent of the units sold with a reduction in price to $370. The product is currently earning a profit of $60 per unit. The president of Wisconsin Corporation believes that his company needs to maintain the same profit level per unit. The total market for the product has annual sales of 12,500 units.

a. How many dollars does Wisconsin Corporation currently sell of the product each year?

b. What is the target price per unit?

c. What is the target cost per unit?

Answer rating: 100% (QA)

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