Question

The marketing manager of Fanning Corporation has determined that a market exists for a telephone with a sales price of $20 per unit. The production manager estimates the annual fixed costs of producing between 41,200 and 81,000 telephones would be $330,000. Required Assume that Fanning desires to earn a $130,000 profit from the phone sales. How much can Fanning afford to spend on variable cost per unit if production and sales equal 46,000 phones?

Answer 1

Answer: Variable cost per unit = $15.65

Step-by-step explanation:

No of unit Sold = 46,000

Total Contribution Required = Total Fixed Cost + profit required

Total Contribution Required = $330,000 + $130,000

Total Contribution Required = $200,000

No of unit Sold =
`(Total\ Contribution\ Required)/(Sale\ Price - Variable\ cost\ per\ unit)`

46,000 =
`(200,000)/(20 - Variable\ cost\ per\ unit)`

`(20 - Variable\ cost\ per\ unit) = (200,000)/(46,000)`

Variable cost per unit = 20 - 4.35

Variable cost per unit = $15.65