Question

1. Manufacturing Process Incorporation plan to produce a new ergonomic chair. Before the company starts producing this chair they need to determine the production cost per unit. Compute the cost of each chair if every container with the required plastic to manufacture 16 chairs has a cost of 500 dollars. The cost for using the equipment, energy, labor, and marketing is 55 dollars and 15 cents per chair. (Round the answer to the nearest cent).

2. If they want a profit of 70% what would be the price of the chair? (Round the answer to the nearest cent)

Answer 1

1. cost per chair: $86.40

2. selling price per chair: $146.88

Explanation:

1. The total cost per chair will be the sum of the cost of materials and the overhead cost (equipment, energy, labor, marketing). The cost of materials is ...

$500/(16 chairs) = $31.25/chair

So, the total cost is ...

cost of each chair = material cost + overhead cost

= $31.25 +55.15

cost of each chair = $86.40

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2. We assume the markup is 70% of the cost, so will be ...

0.70 · $86.40 = $60.48

Then the selling price of the chair will be ...

selling price = cost + markup

selling price = $86.40 +60.48

selling price = $146.88