The marketing manager of Adams Corporation has determined that a market exists for a telephone with...
The marketing manager of Adams Corporation has determined that a market exists for a telephone with a sales price of $23 per unit. The production manager estimates the annual fixed costs of producing between 41,000 and 81,300 telephones would be $621,200.
Assume that Adams desires to earn a $118,000 profit from the phone
sales. How much can Adams afford to spend on variable cost per unit
if production and sales equal 46,200 phones?
Variable Cost per Unit=
Homework Answers
| Ans. | Units sales for desired profit = (Fixed cost + Desired profit) / Contribution margin per unit | ||
| 46,200 = ($621,200 + $118,000) / Contribution margin per unit | |||
| 46,200 = $739,200 / Contribution margin per unit | |||
| Contribution margin per unit = $739,200 / 46,200 | |||
| Contribution margin per unit = $16 per unit | |||
| Variable cost per unit = Selling price per unit - Contribution margin per unit | |||
| $23 - $16 | |||
| $7 per unit | |||
| *Selling price is the sum of variable cost per unit and contribution margin per unit, so variable cost per unit can be | |||
| find out by using the difference between selling price per unit and contribution margin per unit. | |||
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