1. A company believes it can sell 5,000,000 of its proposed new optical mouse at a price of $10.50 each. There will be $8,000,000 in fixed costs associated with the mouse. If the company desires to make a profit $2,000,000 on the mouse, what is the target variable cost per mouse?
2. A company has $30 per unit in variable costs and $1,200,000 per year in fixed costs. Demand is estimated to be 106,000 units annually. What is the price if a mark up of 40% on total costs is used to determine the price?
3. Power Drive Inc. produces a hard disk drive that sells for $175 per unit. The cost of producing 25,000 drives in the prior year was:
Direct materials $625,000; Direct Labor $375,000; Variable overhead $125,000; fixed overhead 1,500,000. At the start of the current year, the company received an order for 3,400 drives from a computer company in China. Management of Power Drive has mixed feelings about the order. On the one hand they welcome the order because currently have exceeds capacity. Also, this is the company's first international order. On the other hand, the company in China is willing to pay only $135 per unit. What is the effect on profit accepting the order?
4. Wizard Corporation has analyzed their customer and order handling data for the past year and has determined the following costs:
Order processing cost per order....$7
Additional costs if order must be expedited (rushed)...$8.50
Customer technical support calls (per call)...$12
Relationship Management costs (per customer per year)...$1,200
In addition to these costs, product costs amount to 75% of Sales. In the prior year. Wizard had the following experience with one of its customers. Chester Company:
Sales....$16,000
Number of orders...160
Percent of orders marked rush...70%
Calls to technical support...80
Required: Calculate the profitability of the Chester Company account._____________________