Question

ABC Company is a highly competitive market and there are many supplies with a similar product. ABC has asked that you determine the cost of their product and help them with setting a price, and then determining the break-even and target profit points of operation.

ABC designed their operation (space and people) to be able to make 150,000 units per year. The expectation is that for the next year or two they will make and sell about 30,000 units per year.

The following information was provided for costs

a. Direct Material Costs for each widget made are $1.40

b. Direct Labor Costs for each widget made are $0.60

c. Operating Costs (all fixed) are:

Rent	$40,000
Salaries	$180,000
Marketing and Advertising	$40,000
Insurance and Fees	$10,000
Transportation & Other	$30,000

Show work please!

1.) What is the cost per unit for each widget?

2.) What price should ABC Company charge? How did you arrive at this price?

3.) How much will ABC make or lose at your price point if they sell 30,000 units?

4.) What is the break-even point for ABC at your price point?

5.) If ABC wants to make $100,000 profit how many widgets must be sold at your price point?

Answer 1