A defense contractor has been able to summarize its total annual fixed costs as RM 100,000 and the total variable cost per unit of production as RM 33. (i) If only 5,000 units is all that is expected to sell to the government this year, determine what should the per unit selling price be to make a 25% profit this year. (ii) If foreign sales of 3,000 units per year is to be added to the 5,000 units government contract above and a 25% profit is acceptable for this contractor again, determine what could be the new selling price per unit.

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Cost of Production

In economic theory, production costs are the costs incurred by an industrial organization when it engineers a project or provides a service that generates revenue and benefits. Labor costs, raw materials, consumable manufacturing costs, and general overhead sum up, accounting for production costs. Total cost data is calculated by combining total direct costs of materials, labor costs, and total production costs.