Question

7. Sansui Inc. is currently designing a new sound amplifier that is estimated to have the following costs a manufacturing per unit. As for the corporate profit, Sansui is planning to add 35% to its manufacturing cost to make up for that. Calculate the following based on the given data: a) What is the unit profit that Sansui is planning to receive from each amplifier? b) What is the total cost to produce a batch of 20,000 amplifiers? c) Historical production data shows that 2% of the product will be damaged and discarded during the manufacturing process, 2% of the finished product will remain unsold, and 2.7% of the products will be returned for refund after they are sold. What would Sansui's profit be on the batch of 20,000 if this data is reliable? (10 Marks) Cost Category Materials Labour Overhead Unit Costs ($) 59 40 113

Answer 1

a) Calculation of unit profit from each amplifier:

Profit per unit = Sales value per unit-Total cost per unit

here, Total cost of one unit will be $59+$40+$113=$212

Selling price per unit=$212+35%=$286.2

So profit =$286.2-$212

=$74.2

b) Calculation of total cost to produce a batch of 20000 amplifiers:

Total cost per unit of amplifier=$212

Total cost to produce 20000 amplifiers= $212*20000 amplifiers

=$4240000

c) Here 2% is damaged and 2% is unsold. That is 96% is sold.

Here, the sale units are 20000 amplifiers*96%,i,e 19200 amplifiers.

Cost of goods sold=cost per unit*sales unit

=$212*19200 amplifiers

=$4070400

Sales units to be return=19200 amplifiers*2.7%

=518.4 amplifiers(approximately 518 amplifiers)

Sales value=19200 amplifiers*$286.2-518 amplifiers*$286.2

=$5495040-$148251.6

=$5346788.4

Profit=Sales value- cost of goods sold

=$5346788.4-4070400

=$1276388.4