Question

There are 6 question. please round to 4 decimal places.

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

Volume=	57,500
Variable manufacturing	$                           46,65,000
Variable selling & admin expenses	$                             8,40,650
Total variable cost	$                           55,05,650
Facility level Fixed OH	$                           23,30,875
Fixed selling & admin expenses	$                             6,60,495
Batch level fixed OH	$                             3,45,000
Total fixed cost	$                           33,36,370
Total product cost for 1 Year	$                           88,42,020
1)
Total product cost	$                           88,42,020
Less: Selling & admin OH
Variable	$                           -8,40,650
Fixed	$                           -6,60,495
Full manufacturing costs	$                           73,40,875
Add:31% markup	$                           22,75,671
Price	$                           96,16,546
Volume	57,500
Price per unit	$                                167.24
2)
Total product cost for 1 Year	$                           88,42,020
No of years	2
Full life cycle cost	$                       1,76,84,040
Add: 22% markup	$                           38,90,489
Total price	$                       2,15,74,529
Volume expected	1,15,000	57500*2
Price per unit	$                                187.60
3)
Total product cost for 1 Year	$                           88,42,020
Less:
Less: Selling & admin OH
Variable	$                           -8,40,650
Fixed	$                           -6,60,495
Total direct costs	$                           73,40,875	0.78x
Gross profit	$                           20,70,503	0.22x	7340875/0.78*0.22
Price	$                           94,11,378	1x
Volume	57,500
Price per unit	$                                163.68
4)
Total product cost for 1 Year	$                           88,42,020
No of years	2
Full life cycle cost	$                       1,76,84,040	0.78X
Add: 22% markup	$                           49,87,806	0.22X	17684040/0.78*0.22
Total price	$                       2,26,71,846	1X
Volume expected	1,15,000
Price per unit	$                                197.15
5)
Total product cost for 1 Year	$                           88,42,020
Add:
15% return on investment	$                           33,50,250	22335000*15%
Total price	$                       1,21,92,270
Volume expected	57,500
Price per unit	$                                212.04
6)
	1)	2)	3)	4)	5)
Sales value	$                       2,15,74,529	$                               2,15,74,529	$    94,11,378	$             2,26,71,846	$ 1,21,92,270
Less: Variable costs	$                         -55,05,650	$                                 -55,05,650	$   -55,05,650	$               -55,05,650	$ -55,05,650
Contribution margin	$                       1,60,68,879	$                               1,60,68,879	$    39,05,728	$             1,71,66,196	$    66,86,620
Less: Fixed costs	$                         -33,36,370	$                                 -33,36,370	$   -33,36,370	$               -33,36,370	$ -33,36,370
Total operating profit	$                       1,27,32,509	$                               1,27,32,509	$      5,69,358	$             1,38,29,826	$    33,50,250

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