Assume that as a result of reorganizing the production process, the management of Benoit Manufacturing was able to reduce direct material cost per unit by $5 due to a change in the supplier of the raw material used in the production process. Variable manufacturing overhead per unit would also decrease by $3. The business is also considering paying additional annual commission of $36,400 to its sales team as part of the sales expansion effort, which should result in an increase in sales revenue.The head of the marketing department has indicated that the effort of the sales team should result in a 5% increase in sales volume. What must the new selling price per unit be if the company wishes to meet the shareholder's desired profit level for 2020? Is this a viable option? Benoit Manufacturing Company manufactures and sells parts for various musical gadgets. The followinginformation to a single part which is used in the production of a wind instrument. The business earnedOperating Income of $220,000 in 2019, when production was 3,000 units and the president of Darius is underpressure from shareholders to increase operating income in 2020 and is therefore considering theimplementation of strategies mainly geared at increasing revenues and or decreasing variable costs. Data forvariable cost per unit and total fixed costs were as follows:Direct MaterialDirect LabourVariable Manufacturing Overhead $48$58$74Variable expenses per unit:Fixed expenses:Fixed Manufacturing OverheadFixed Selling Costs$215,000$65,000Fixed Administrative Costs$160,000

Selling price is the price at which the commodities are sold.

Answered: Benoit Manufacturing Company…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter14: Capital Structure Management In Practice

Section14.A: Breakeven Analysis

Problem 5P

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Assume that as a result of reorganizing the production process, the management of Benoit Manufacturing was able to reduce direct material cost per unit by $5 due to a change in the supplier of the raw material used in the production process. Variable manufacturing overhead per unit would also decrease by $3. The business is also considering paying additional annual commission of $36,400 to its sales team as part of the sales expansion effort, which should result in an increase in sales revenue.
The head of the marketing department has indicated that the effort of the sales team should result in a 5% increase in sales volume. What must the new selling price per unit be if the company wishes to meet the shareholder's desired profit level for 2020? Is this a viable option?

Benoit Manufacturing Company manufactures and sells parts for various musical gadgets. The following
information to a single part which is used in the production of a wind instrument. The business earned
Operating Income of $220,000 in 2019, when production was 3,000 units and the president of Darius is under
pressure from shareholders to increase operating income in 2020 and is therefore considering the
implementation of strategies mainly geared at increasing revenues and or decreasing variable costs. Data for
variable cost per unit and total fixed costs were as follows:
Direct Material
Direct Labour
Variable Manufacturing Overhead $48
$58
$74
Variable expenses per unit:
Fixed expenses:
Fixed Manufacturing Overhead
Fixed Selling Costs
$215,000
$65,000
Fixed Administrative Costs
$160,000

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