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Williams Inc. produces a single product, a part used in the manufacture of automobile transmissions. Known for its quality and performance, the part is sold to luxury auto manufacturers around the world. Because this is a quality product, Williams has some flexibility in pricing the part. The firm calculates the price using a variety of pricing methods and then chooses the final price based on that information and other strategic information. A summary of the key cost information follows. Williams expects to manufacture and sell 57,500 parts in the coming year. While the demand for Williams's part has been growing in the past 2 years, management is not only aware of the cyclical nature of the automobile industry, but also concerned about market share and profits during the industry's current downturn. Variable manufacturing Variable selling and administrative Pacility-level fixed overhead Fixed selling and administrative Batch-level fixed overhead Total investment in product line Expected sales (units) Total Costs $ 4,665,000 840,650 2,330,875 660,495 345,000 22,335,000 57.500 Required: 1. Determine the price for the part using a markup of 31% of full manufacturing cost. 2. Determine the price for the part using a markup of 22% of full life-cycle cost. 3. Determine the price for the part using a desired gross margin percentage to sales of 43% 4. Determine the price for the part using a desired life-cycle cost margin percentage to sales of 26% 5. Determine the price for the part using a desired before-tax return on investment of 15%. 6. Determine the total contribution margin and total operating profit for each of the methods in requirements 1 through 5. Complete this question by entering your answers in the tabs below.

Answer 1

Total variable cost Variable cost per unit $ 55,05,650.00 -4665000+840650 $ 95.75 =5505650/57500 Total variable manufacturing cost Total fixed manufacturing cost Total manufacturing cost Total selling & administrative cost Total life cycle cost Number of units Manufacturing cost per unit Life cycle cost per unit $ 46,65,000.00 $ 26,75,875.00 =2330875+345000 $ 73,40,875.00 -4665000+2675875 $ 15,01,145.00 =840650+660495 $ 88,42,020.00 =7340875+1501145 57500 $ 127.67 =7340875/57500 $ 153.77 -8842020/57500 1 31% at full manufacturing cost $ 167.25 =127.67*131% 2 22% of full life cycle cost $ 187.60 =153.77*122% 3 Desired gross margin @43% $ 223.98 =127.67/(100%-43%) 4 Desired life cycle cost marginpercentage to sales@26% $ 207.80 =153.77/(100%-26%) 5 Desired before tax return on investment of 15% $ 37.89 =(22335000*15%)/(57500*153.77)*100