Question

GoSnow sells snowboards. Each snowboard requires direct materials of $128, direct labor of $53, and variable overhead of $63. The company expects fixed overhead costs of $301,000 and fixed selling and administrative costs of $229,000 for the next year. The company has a target profit of $189,800. It expects to produce and sell 11,800 snowboards in the next year. Compute the selling price using the variable cost method. (Round your answer to 2 decimal places.)

Answer 1

Ans.	Sales units for target profit = (Total fixed costs + Target profit) / (Selling price per unit - Total Variable cost per unit)
	11,800   =   ($530,000 + $189,800) / (Selling price per unit - $244)
	11,800   =   $719,800 / (Selling price per unit - $244)
	(Selling price per unit - $244)    =   $719,800 / 11,800
	(Selling price per unit - $244)    =   $61
	Selling price per unit   =   $61 + $244
	Selling price per unit   =   $305
	*Calculation of Total variable cost per unit:
	Direct materials	$128
	Direct labor	$53
	Variable overhead	$63
	Total Variable cost per unit	$244
	*Calculation of Total fixed costs:
	Fixed overhead cost	$301,000
	Fixed selling & administrative cost	$229,000
	Total fixed costs	$530,000