Question

Data for the next 3 questions: Sandra has developed a new product that she has decided to produce and market. Sandra has found a small building to rent for $1500 a month that will house the production facilities. One major piece of equipment that will be used to manufacture the product will be rented for $300 a month. Sandra purchased all of the other needed tools for $3,000 which will last for two years (will depreciated $1500 per month). Material costs to make the product are estimated at $3 per unit. Sandra is expecting to spend about 0.25 hour for production of each unit and she is planning a pay rate of $32 per hour for herself. Monthly advertising costs for the product are estimated at $800. Sandra is planning to pay $2 commission for sale of cach unit. She is expecting to sell 1000 units cach month at a price of $18 each. Q15. Compute total fixed costs per month Example of answer: 4500 Question 16 (5 points) Q16. Compute variable cost per unit. Example of answer: 2.10 Question 17 (5 points) Q17. Compute the amount of profit that Sandra will be making per unit Example of answer: 2.10

Answer 1

Fixed costs per month = Rent+depreciation +advertising cost

=1500+300+1500+800

=$4100

B.variable cost per unit = 3+0.25*32+2

=$13 per unit

Profit per unit = selling price per unit- variable costs per unit- fixed cost per unit

= 18 - 13-4100/1000

=$0.9 per unit