Fry Ltd are developing a new type of umbrella for cyclists. Market research has indicated that customers would be willing to pay £80 for the product. The company usually expect a profit margin of 12% on products. Fixed costs for enhancements to production machinery are expected to be £250,000 per year. The company currently has orders for 8000 units this year. Materials are expected to cost £25 per unit. Each product requires 45 minutes of specialist labour to manufacture. The personnel department are having difficulty in recruiting these specialist staff and report that the expected rate of pay is £20- £25 per hour. a) Calculate the maximum hourly rate that Fry Ltd could pay to achieve the Target Cost.
Fry Ltd are developing a new type of umbrella for cyclists. Market research has indicated that customers would be willing to pay £80 for the product. The company usually expect a profit margin of 12% on products. Fixed costs for enhancements to production machinery are expected to be £250,000 per year. The company currently has orders for 8000 units this year. Materials are expected to cost £25 per unit. Each product requires 45 minutes of specialist labour to manufacture. The personnel department are having difficulty in recruiting these specialist staff and report that the expected rate of pay is £20- £25 per hour. a) Calculate the maximum hourly rate that Fry Ltd could pay to achieve the Target Cost.
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter16: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 11E
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Fry Ltd are developing a new type of umbrella for cyclists.
Fixed costs for enhancements to production machinery are expected to be £250,000 per year. The company currently has orders for 8000 units this year. Materials are expected to cost £25 per unit. Each product requires 45 minutes of specialist labour to manufacture.
The personnel department are having difficulty in recruiting these specialist staff and report that the expected rate of pay is £20- £25 per hour.
- a) Calculate the maximum hourly rate that Fry Ltd could pay to achieve the Target Cost.
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