For the past 2 years, 3 companies have dominated the high protein sports bar industry holding a combined 80% of the market. Rocket Sports currently ranks second in the market. Its management is considering introducing a new Heatr line of winter protein bars utilizing a groundbreaking new protein form. Rocket Sports produces the bars in a single department and all materials are added at the beginning of the process. As corporate cost accountant you have developed the following cost of production information for the Heatr line.
| WIP Inventory: |
Units |
Costs |
| January 1 (50% complete) |
2200 |
|
| Direct Materials |
|
$2080 |
| Conversion Costs |
|
$620 |
| December 31 (60% Complete) |
2000 |
|
| Direct Materials |
|
$1880 |
| Units Started during the year |
458500 |
|
| Materials added |
|
430990 |
| Conversion added |
|
229400 |
Selling and administrative costs are $1.60 per unit. Each of Rocket Sports' main competitors is selling a protein bar. Company X sells its bar for $4.10 and Company Y sells its bar for $4.05. Rocket Sports tries to earn a profit of 20% of the unit cost.
- What factors must Rocket Sports consider in setting their price?
- Using the average costing method what is the cost per unit?
- Recommend and defend a unit selling price range for the Heatr protein bars.
Please make your initial post by midweek, and respond to at least one other student's post by the end of the week. Please check the Course Calendar for specific due dates.