Fair Value

= Unit Selling Price – Unit Variable Cost = $9.00 – ($1.25 + $0.35 + $1.00) = $6.40

The firm initially produces where MR=MC charging price P1 and quantity Qa. At this price the firm has a large amount of

1- The total unit cost = Total Variable Cost + Production Fixed Expenses + Advertising Expense + Selling and Administrative Expense = 3.23 + 1.20 + 0.30 + 0.19 = 4.92.

From Exhibit 4, we can see that the actual expenses are less than the standard ones, so the reductions from those expenses lead to the improved profitability.

1. For financial accounting purposes, what is the total amount of product costs incurred to make 10,000 units?

The budget analysis shows that the labor hours of the firm are higher than the budgeted amount. As such, the firm needs to evaluate the cost benefit analysis of making or buying their products. To make this decision, various factors need to be considered. Before making the decision, Peyton needs to evaluate the marginal costs and revenue of making versus buying the products. The firm should take the option which provides the highest marginal profit which is the

15. In pure competition, each extra unit of output that a firm sells will yield a marginal revenue that is ( )

d. Calculate the price elasticity of demand in each market and discuss these in relation to the prices to be charged in each market.

Consolidated Company makes cardboard boxes. During the most recent accounting period Consolidated paid $60,000 for raw materials, $48,000 for labor, and $52,000 for overhead costs that were incurred to make boxes. Consolidated started and completed 400,000 boxes. Based on this information, what is the average manufacturing cost per box?

The materials used per unit of production, the Run labor hours and machine hours are provided in exhibit 2. The overhead expenses per unit of the product have been apportioned according to their percentage production and usage. (Drucker, 1999)

Based on competitor price points in number three and the positioning strategy of Show Circuit , the recommended price point for a case of Show Circuit would be $12.00. This is a recommended price point because it is aligns with Show Circuit’s position strategy and it is just slightly higher than the highest competitor price. Also, the contribution to fixed cost is higher than its competitors.

A result on the next page shows that at sales price of $21.50, the sales quantity rises to 1,140,085 units and net profit turns to positive for the first time. Besides, if a company continues to reduce the price further, at the point of $15.50, it is where the company’s profit on product 101 is in the highest position as it gives the net profit of $3,901,908.

7. Though numbers given in the cost data can not be contested, I would definitely contest the way total cost has been computed. The item 345 department operates within a large manufacturing facility that churns out number of other products too. Hence judging the profitability of item 345 on the basis of total cost is not practical.

First, we have identified if there is really an insufficiency in the amount of selling prices set by the Sales Department, in reference to Exhibit 1 of the case. We did this through identifying the maximum amount of overhead costs that the company can incur for the three products and comparing it with the total overhead costs. See Table 1 for details.

Describe and give examples of some of the following types of pricing objectives: profit, market share, competitive effect, customer satisfaction, and image enhancements.