Athens Corporation manufactures Product A, which is used in the production of mountain bikes. Per-unit information about Product A follows. Prevailing market price P90 Direct materials 40 Direct labor 16 Manufacturing overhead 12 Selling and administrative expenses 7 Athens has traditionally used a 40% markup on total cost to arrive at a reasonable selling price. The company, though, has noticed a sizable drop in sales volume during the last few quarters, which it attributes to new entrants in the marketplace. 1. Based on the markup, the selling price of Product A would be 2. If management desired to meet the prevailing market price and maintain the current rate of profit on sales, what must happen to the company's total costs (increase or decrease)? By how much?
Athens Corporation manufactures Product A, which is used in the production of mountain
bikes. Per-unit information about Product A follows.
Prevailing market price P90
Direct materials 40
Direct labor 16
Manufacturing overhead 12
Selling and administrative expenses 7
Athens has traditionally used a 40% markup on total cost to arrive at a reasonable selling
price. The company, though, has noticed a sizable drop in sales volume during the last few
quarters, which it attributes to new entrants in the marketplace.
1. Based on the markup, the selling price of Product A would be
2. If management desired to meet the prevailing market price and maintain the current rate of
profit on sales, what must happen to the company's total costs (increase or decrease)? By
how much?
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 2 images
