Problem: Markup- pricing
Suppose IPS uses markup pricing for Android01. Fixed costs are $4.5 million, and for a level of production of 300 units, the variable cost-per-unit is $48,000.
Question 1: What is the price of the Android01 at 30% markup over full cost?
Choose the Profit Maximizing Output Level
The CEO's next question is, "What level of output would be required to maximize our profit on the Android01?" You have calculated the variable cost-per-unit for different levels of production. From market research, you have a schedule of prices for these levels. The information is summarized in the table below:
|
Number of Units
|
Variable cost per unit ($)
|
Sale Price per unit ($)
|
|
200
|
60,000
|
70,000
|
|
250
|
54,000
|
66,000
|
|
300
|
48,000
|
64,000
|
|
350
|
46,000
|
59,000
|
|
400
|
45,000
|
52,000
|
A recommendation on output could affect everyone in the company, from management to sales, to the floor manager and assembly line workers! You don't want to get this one wrong so you take some extra time to proof your calculations.
Question 2: Based on profit-maximization analysis, what level of output should you recommend to the CEO?
Budget Your CEO has asked you to prepare a production cost budget for the MiniY for May 20X8. The actual costs in April 20X8 were:
MiniY: Production Cost Budget
|
April 2018
|
|
|
Production-Units of MiniY
|
3,000
|
|
Components cost (variable)
|
24,000,000
|
|
Labor cost (variable)
|
13,500,000
|
|
Rent (fixed)
|
6,000,000
|
|
Depreciation (fixed)
|
6,000,000
|
|
Other (fixed)
|
2,000,000
|
|
TOTAL
|
51,500,000
|
For the month of May, the number of MiniY produced will increase to 3,200, reflecting an anticipated sales increase related to a new marketing campaign.
Question 3: Using the above information, prepare a budget for May 20X8 stating the total cost. Use a spreadsheet to display your data and calculations.Before starting your calculations, review materials on integrating accounting and financial information.Submit your Production Cost Budget Report and Calculations to the dropbox below. Be sure to show your calculations in Excel and provide a narrative analysis in PowerPoint. Your narrative analysis should summarize the results of your analysis and make recommendations for the benefit of company.