Q1. A company believes it can sell 6,000,000 of its proposed new optical mouse at a price of $11.00 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?
Q2. 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) $9.00
Customer technical support calls (per call) $12
Relationship management costs (per customer per year) $1200
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.
Q3. A company has $45 per unit in variable costs and $1,200,000 per year in fixed costs. Demand is estimated to be 104,000 units annually. What is the price if a markup of 40% on total cost is used to determine the price?