Mademoiselle Company produces women's handbags. The cost of producing 1,210 handbags is as follows:
|Total manufacturing cost||$29,600|
The selling and administrative expenses are $28,200. The management desires a profit equal to 18% of invested assets of $498,000.
a. Determine the amount of desired profit from the production and sale of 1,210 handbags.
b. Determine the product cost per unit for the production of 1,210 handbags.
c. Determine the product cost markup percentage for handbags.
d. Determine the selling price of handbags.
The desired profit is the profit that a business unit wants to earn from its business operation. To earn the desired profit the management prepares plans and implement to earn the desired profit.
Answer and Explanation:
a)The amount of desired profit is 18% of the invested assets of $498,000. 18% x $498,000 = $89,640
b)Product Cost per Unit equals total manufacturing costs divided by the number of units = $29,600 / 1,210 = $24.46 per unit.
c)Product Cost Markup Percentage = Gross Profit / Manufacturing Costs = $89,640 / $29,600 = 303% markup
d) Total sales needs to be:profit + Manufacturing Costs + Selling Costs = $89,640 + $29,600 + $28,200 = $147,440.
The selling price per handbag = Total sales required divided by the number of handbags = $147,440/1,210 = $121.85 per handbag
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from Principles of Marketing: Help and ReviewChapter 12 / Lesson 22