Question

Hamby Company expects to incur overhead costs of $10,000 per month and direct production costs of $136 per unit. The estimated production activity for the upcoming year is 1,600 units. If the company desires to earn a gross profit of $61 per unit, the sales price per unit would be which of the following amounts?a. $205b. $197c. $272d. $141

Answer 1

c. $272

Step-by-step explanation:

Overhead costs (O) = $10,000 per month

Direct production costs (Pc) = $136 per unit

Units produced (n) = 1,600 units

The total manufacturing cost per unit for a production activity of 1,600 units is given by:

`C=((P_C*n)+(O*12))/(n)\\C=((136*1,600)+120,000)/(1,600)\\C=\$211`

For a desired gross profit per unit of $61, the selling price should be:

`61=S-211\\S=\$272`

The answer is c. $272