Question

An executive from a large merchandising firm has called your vice president for production to get a price quote for an additional 100 units of a given product. The vice president has asked you to prepare a cost estimate. The number of hours required to produce a unit is 8. The average labor rate is​ $17 per hour. The materials cost​ $14 per unit. Overhead for an additional 100 units is estimated at​ 30% of the direct labor cost. If the company wants to have a​ 40% profit​ margin, what should be the price to quote for 100​ units?

Answer 1

Price= $267,12

Step-by-step explanation:

In base of the following information, we need to calculate the price of 100 units:

- Q=100

- The number of hours required to produce a unit is 8. The average labor rate is​ $17 per hour.

- The materials cost​ $14 per unit.

- Overhead for an additional 100 units is estimated at​ 30% of the direct labor cost.

Total direct labor= (8hs*$17)*100= $13600

Total direct material= $14*100= $1400

Manufactured overhead= (0,30*13600)= $4080

Total cost= 13600 + 1400 + 4080= $19080

Cost of unit= 19080/100= $190,8

Profit= 40%

Price= $190,8*1,40= $267,12