Corrientes Company produces a single product in its Buenos Aires plant that currently sells for 5.40p per unit. Fixed costs are expected to amount to 57,000p for the year, and all variable manufacturing and administrative costs are expected to be incurred at a rate of 2.40p per unit. Corrientes has two salespeople who are paid strictly on a commission basis. Their commission is 10 percent of the sales revenue they generate. (Ignore income taxes.) (p denotes the peso, Argentina’s national currency. Many countries use the peso as their national currency. On the day this exercise was written, Argentina’s peso was worth .104 U.S. dollar.)
Required:
Selling price per unit = 6.40p
All variable manufacturing and administrative costs per unit = 2.40p
Commission to salespersons per unit = 10% of selling price per unit = 6.40p x 10% = 0.64p
Therefore,
Contribution margin per unit = 6.40p - 2.40p - 0.64p = 3.36p
Number of units to be sold = 62,000
Therefore,
Total contribution margin = 3.36p x 62,000 units = 208,320p
Fixed costs for the year = 57,000p
Cost of additional advertising = 4,000p
Therefore,
Total fixed costs for the year = 57,000p + 4,000p = 61,000p
Thus,
Profit on 62,000 units = Total contribution margin - Total fixed costs = 208,320p - 61,000p = 147,320p
Corrientes Company produces a single product in its Buenos Aires plant that currently sells for 5.40p...
Corrientes Company produces a single product in its Buenos Aires plant that currently sells for 6.70 p per unit. Fixed costs are expected to amount to 56,000 p for the year, and all variable manufacturing and administrative costs are expected to be incurred at a rate of 2.30 p per unit. Corrientes has two salespeople who are paid strictly on a commission basis. Their commission is 9 percent of the sales revenue they generate. (Ignore income taxes.) (p denotes the...
[The following information applies to the questions displayed below.] Corrientes Company produces a single product in its Buenos Aires plant that currently sells for 6.70 p per unit. Fixed costs are expected to amount to 56,000 p for the year, and all variable manufacturing and administrative costs are expected to be incurred at a rate of 2.30 p per unit. Corrientes has two salespeople who are paid strictly on a commission basis. Their commission is 9 percent of the sales...
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