Success Electronics LLC is planning to introduce a low cost smart phone with attractive features. The market research information suggests that the product should sell 2000 units at RO 30 per unit. The company seeks to make a mark-up of 20% product cost. It is estimated that the lifetime costs of the product will be as follows: Design and development costs RO 5000 Manufacturing costs RO 22 per unit End of life costs RO 7000 Based on the above case, answer the following THREE questions: Question text What is target cost per unit to achieve the desired profit? a. RO 20 per unit b. RO 25 per unit c. RO 24 per unit d. RO 22 per unit Clear my choice Question text What is the desired profit per unit? a. RO 5 per unit b. RO 15 per unit c. RO 10 per unit d. RO 6 per unit Clear my choice Question text What is the original lifecycle cost per unit and is the product worth making on that basis? a. RO 29 per unit; The product is not worth making b. RO 24 per unit; The product is worth making c. RO 28 per unit; The product is not worth making d. RO 23 per unit; The product is worth making Clear my choice
Cost-Volume-Profit Analysis
Cost Volume Profit (CVP) analysis is a cost accounting method that analyses the effect of fluctuating cost and volume on the operating profit. Also known as break-even analysis, CVP determines the break-even point for varying volumes of sales and cost structures. This information helps the managers make economic decisions on a short-term basis. CVP analysis is based on many assumptions. Sales price, variable costs, and fixed costs per unit are assumed to be constant. The analysis also assumes that all units produced are sold and costs get impacted due to changes in activities. All costs incurred by the company like administrative, manufacturing, and selling costs are identified as either fixed or variable.
Marginal Costing
Marginal cost is defined as the change in the total cost which takes place when one additional unit of a product is manufactured. The marginal cost is influenced only by the variations which generally occur in the variable costs because the fixed costs remain the same irrespective of the output produced. The concept of marginal cost is used for product pricing when the customers want the lowest possible price for a certain number of orders. There is no accounting entry for marginal cost and it is only used by the management for taking effective decisions.
Success Electronics LLC is planning to introduce a low cost smart phone with attractive features. The
Design and development costs RO 5000
End of life costs RO 7000
Based on the above case, answer the following THREE questions:
Question text
Question text
Question text
Step by step
Solved in 2 steps
