Question

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 56,500 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.

	Total Costs
Variable manufacturing	$	4,667,000
Variable selling and administrative		842,650
Facility-level fixed overhead		2,332,875
Fixed selling and administrative		662,495
Batch-level fixed overhead		347,000
Total investment in product line		22,337,000
Expected sales (units)		56,500

Required:

1. Determine the price for the part using a markup of 35% of full manufacturing cost.

2. Determine the price for the part using a markup of 24% of full life-cycle cost.

3. Determine the price for the part using a desired gross margin percentage to sales of 45%.

4. Determine the price for the part using a desired life-cycle cost margin percentage to sales of 29%.

5. Determine the price for the part using a desired before-tax return on investment of 12%.

6. Determine the total contribution margin and total operating profit for each of the methods in requirements 1 through 5

Answer 1

the detailed answer for the above question is explained below

Tota Vaxiade Cost 550 96 50 4.667,000 +串842,6 50 Vastable Cost pes unit 509, 65o a. 516 Total Vaable manufe chas Total fixed manufachurig ast &33a 825十字344,000 |キ4,667,000 3618a5 -Total manufact. cas Totol Selling anol admí n'strahve cost t 5o55 424546, | $8,3520 ao life cycle cost-e-c+9 Numba of Unig →C Total 53,500 On%

Manu factung cat per unit 130, 03 丰7346895 56, 500uwit 156. 6 E2,0 20 ($194. га Oho Desired aro y mngin pet centome to Sale of 49% 130.03 30.03 OsSF

Price 336-42 0.61 a 332,000 x 0.12 56 500 UnIK X 156。67 Suhshhahe 、X, Value in eQuahan(,)

3 423642 2564$201. 1 (q 구.sic) | (t a -5,c) | ($9จ.sic) | ($9 จ.sic ) | ($9 3.5ις) Varayle Cost pao 106.5 Total Comtibuh om Fixed Cost 233 28as+ 6624s* + 3 47,000