Operating Income of $220,000 in 2019, when production was 3,000 units Variable expenses per unit: Direct Material $58 Direct Labour $74 Variable Manufacturing Overhead $48 Fixed expenses: Fixed Manufacturing Overhead $215,000 Fixed Selling Costs $65,000 Fixed Administrative Costs $160,000 Assume that as a result of reorganizing the production process, the management of Benoit Manufacturing was able to reduce direct material cost per unit by $5 due to a change in the supplier of the raw material used in the production process. Variable manufacturing overhead per unit would also decrease by $3. The business is also considering paying additional annual commission of $36,400 to its sales team as part of the sales expansion effort, which should result in an increase in sales revenue. The head of the marketing department has indicated that the effort of the sales team should result in a 5% increase in sales volume. What must the new selling price per unit be if the company wishes to meet the shareholders desired profit level for 2020? Is this a viable option?
Operating Income of $220,000 in 2019, when production was 3,000 units
Variable expenses per unit: Direct Material $58
Direct Labour $74
Variable Manufacturing Overhead $48
Fixed expenses: Fixed Manufacturing Overhead $215,000
Fixed Selling Costs $65,000
Fixed Administrative Costs $160,000
Assume that as a result of reorganizing the production process, the management of Benoit
Manufacturing was able to reduce direct material cost per unit by $5 due to a change in the supplier of
the raw material used in the production process. Variable manufacturing overhead per unit would also
decrease by $3. The business is also considering paying additional annual commission of $36,400 to
its sales team as part of the sales expansion effort, which should result in an increase in sales revenue.
The head of the marketing department has indicated that the effort of the sales team should result in a
5% increase in sales volume. What must the new selling price per unit be if the company wishes to
meet the shareholders desired profit level for 2020? Is this a viable option?
Step by step
Solved in 2 steps
