Assume Apple is designing a new smartphone. Each unit of this new phone is expected to require $230 of direct materials, $10 of direct labor, $20 of variable overhead, and $20 of variable selling and administrative costs. Required 1. If Apple uses the variable cost method to set selling prices and plans a markup of 200% of variable costs, what is the expected selling price per unit of this new phone? 2. Assume that Apple is a “price taker” and the market sales price for this type of phone is $800 per unit. Compute Apple’s target cost if the company desires a profit of 60% of sales price. expected selling price target cost Apple and Google sell a variety of products. Some products are more profitable than others. Teams of employees in each company make advertising, investment, and product mix decisions. Assume a typical ad costs $800,000 and that the average product for both Apple and Google sells for $400 per unit and generates a contribution margin of 20%. Required 1. Estimate how many additional products this ad must sell to justify its cost. 2. If instead Google targets its advertising towards products with contribution margins of 25% or higher, and all other information is unchanged, estimate how many additional products this ad must sell to justify its cost. 1)addictional products to justify its cost 2)aditional products to justify its cost
Assume Apple is designing a new smartphone. Each unit of this new phone is expected to require $230 of direct materials, $10 of direct labor, $20 of variable overhead, and $20 of variable selling and administrative costs.
Required
1. If Apple uses the variable cost method to set selling prices and plans a markup of 200% of variable costs, what is the expected selling price per unit of this new phone?
2. Assume that Apple is a “price taker” and the market sales price for this type of phone is $800 per unit. Compute Apple’s target cost if the company desires a profit of 60% of sales price.
expected selling price
target cost
Apple and Google sell a variety of products. Some products are more profitable than others. Teams of employees in each company make advertising, investment, and product mix decisions. Assume a typical ad costs $800,000 and that the average product for both Apple and Google sells for $400 per unit and generates a contribution margin of 20%.
Required
1. Estimate how many additional products this ad must sell to justify its cost.
2. If instead Google targets its advertising towards products with contribution margins of 25% or higher, and all other information is unchanged, estimate how many additional products this ad must sell to justify its cost.
1)addictional products to justify its cost
2)aditional products to justify its cost
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