The owner of a small manufacturing business has patented a new device for washing dishes and cleaning dirty kitchen sinks. Before trying to commercialize the device and add it to his or her existing product line, the owner wants reasonable assurance of success. Variable costs are estimated at $8 per unit produced and sold. Fixed costs are about $79,000 per year. Forecasted sales for the first year are 13,000 units if the price is reduced to $16. With this pricing strategy, what would be the product’s total contribution to profits in the first year?

The owner of a small manufacturing business has patented a new device for washing dishes and cleaning dirty kitchen sinks. Before trying to commercialize the device and add it to his or her existing product line, the owner wants reasonable assurance of success. Variable costs are estimated at $8 per unit produced and sold. Fixed costs are about $79,000 per year. Forecasted sales for the first year are 13,000 units if the price is reduced to $16. With this pricing strategy, what would be the product’s total contribution to profits in the first year?

Purchasing and Supply Chain Management

6th Edition

ISBN:9781285869681

Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson

Publisher:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson

Chapter11: Strategic Cost Management

Section: Chapter Questions

Problem 13DQ

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