Baird Manufacturing Co. expects to make 30,500 chairs during the year 1 accounting period. The company made 4,600 chairs in January. Materials and labor costs for January were $16,600 and $24,200, respectively. Baird produced 1,800 chairs in February. Material and labor costs for February were $9,900 and $13,700, respectively. The company paid the $518,500 annual rental fee on its manufacturing facility on January 1, year 1. The rental fee is allocated based on the total estimated number of units to be produced during the year. Required Assuming that Baird desires to sell its chairs for cost plus 30 percent of cost, what price should be charged for the chairs produced in January and February? (Round intermediate calculations and final answers to 2 decimal places.) January February Price per unit
Cost-Volume-Profit Analysis
Cost Volume Profit (CVP) analysis is a cost accounting method that analyses the effect of fluctuating cost and volume on the operating profit. Also known as break-even analysis, CVP determines the break-even point for varying volumes of sales and cost structures. This information helps the managers make economic decisions on a short-term basis. CVP analysis is based on many assumptions. Sales price, variable costs, and fixed costs per unit are assumed to be constant. The analysis also assumes that all units produced are sold and costs get impacted due to changes in activities. All costs incurred by the company like administrative, manufacturing, and selling costs are identified as either fixed or variable.
Marginal Costing
Marginal cost is defined as the change in the total cost which takes place when one additional unit of a product is manufactured. The marginal cost is influenced only by the variations which generally occur in the variable costs because the fixed costs remain the same irrespective of the output produced. The concept of marginal cost is used for product pricing when the customers want the lowest possible price for a certain number of orders. There is no accounting entry for marginal cost and it is only used by the management for taking effective decisions.
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