Question: Wendell Stove Company is developing a TM professional model stove aimed at the hone market. The company estimates that variable costs will be $2,500 per

Wendell Stove Company is developing a TM professional” model stove aimed at the hone market. The company estimates that variable costs will be $2,500 per unit and fixed costs will be $12,000,000 per year.

Required
a. Suppose the company wants to set its price equal to full cost plus 30 percent. To determine cost, the company must estimate the number of units it will produce and sell in a year. Suppose the company estimates that it can sell 6,000 units. What price will the company set?
b. What is odd about setting the price based on an estimate of how many units will be sold?
c. Suppose the company sets a price as in part a, but the number of units demanded at that price turns out to be 5,000. Revise the price in light of demand for 5,000 units.
d. What will happen to the number of unit that will be sold if the price is raised to the one you calculated in part c?
e. Explain why setting price by marking up cost is inherently circular for a manufacturing firm.

Step by Step Solution

★★★★★

3.52 Rating (162 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

a Variable cost per unit 2500 Fixed cost per unit 12000000 6000 20... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Document Format (1 attachment)

259-B-M-A-P-P-S (635).docx

120 KBs Word File

Students Have Also Explored These Related Managerial Accounting Questions!

The Wendel Stove Company is developing a "professional"- model stove aimed at the home market. The company estimates that variable costs will be $2,700 per unit and fixed costs will be $12,600,000...

A beauty product company is developing a new fragrance named Happy Forever. There is a probability of 0.5 that consumers will love Happy Forever, and in this case, annual sales will be 1 million...

A dairy products company is developing a new organic yogurt. The company assembles a panel of tasters to compare two possible formulations of the new product. The panel lists are asked to rate the...

Question 5 of 6 -/1 View Policies Current Attempt in Progress The Marx Stove Company is developing a professional-model' stove aimed at the home market. The company estimates that variable costs will...

The Ceradyne Stove Company is developing a professional-model stove aimed at the home market. The company estimates that variable costs will be $2,610 per unit and fixed costs will be $12,900,000 per...

The Uli Stove Company is developing a professional-model stove aimed at the home market. The company estimates that variable costs will be $2,670 per unit and fixed costs will be $12,000,000 per...

PROBLEM 8-4. Cost-Pius Pricing Wendel Stove Company is developing a "professional" model stove aimed at the home market. The company estimates that variable costs will be $2,000 per unit and fixed...

The Penny Worth Stove Company is developing a "professional-model" stove aimed at the home market. The company estimates that variable costs will be $3,310 per unit and fixed costs will be...

Options for Part Three are: Decrease, Increase, and Remain the same The Uli Stove Company is developing a professional-model' stove aimed at the home market. The company estimates that variable costs...

The Oak Stove Company is developing a "professional-model stove aimed at the home market. The company estimates that variable costs will be $ 2,680 per unit and fixed costs will be $ 12,600,000 per...

A parallel RLC circuit contains a resistor R = 1 and an inductor L = 2H. Select the value of the capacitor so that the circuit is critically damped.

On 1 Jan 2018, A Ltd acquired all the outstanding shares of B Ltd when the equity of B Ltd consisted of share capital (10,000 shares) of $10,000 and retained earnings of $5,000. Details of the...

The production planner determines what inventory is need for future production using Multiple Choice manpower availability report from human resources. bill of materials for the product being...

A U-shaped component is to be formed from the three parts A, B, and C. The picture is shown in Fig. 5-20. The length of A is normally distributed with a mean of 10 millimeters and a standard...

The dynamic behavior of the heat exchanger shown in figure can be described by the following transfer functions The valve lift x is measured in inches. Other symbols are defined in Figure.(a) Find...

Calculate the moment of inertia of a uniform solid cone about an axis through its center (Fig. 9.40). The cone has mass M and altitude h. The radius of its circular base is R. Axis

The Cookenwythe Gas Company pumps propane gas to the nearby Noxious Chemicals, Inc., polypropylene production plant. The gas is metered at the noxious plant at 400m 3 /h at 4.7atm gauge and 30C. The...

Non-financial measures of quality and time. Worldwide Cell Phones (WCP) has developed a cell phone that can be used anywhere in the world (even countries like Japan that have a relatively unique cell...

According to expectancy theory, what can a manager do to increase an employees motivation? Does his or her culture make a difference?

You get what you measure! If so, what problem might be created by managers attempting to achieve favorable material price variances?

What factors should be considered when investigating variances?

Beta Gamma Sigma, the business honor society, recently held a dinner dance. The original (static) budget and actual results were as follows: Subdivide each variance into a sales-activity variance...

What is the price of each of the following bonds ($1,000 principal) if the current interest rate is 6 percent? Firm A: coupon 6%, Maturity 6 years Firm B: coupon 6%, Maturity 12 years Firm C: coupon...

a year ago you bought 100 shares of bradley corp. common stock for $32 per share. During the year, you received dividends of $2.50 per share. The stock is currently selling for $33.50 per share....