Question

Ahmed Corporation makes a mechanical stuffed alligator. The following information is available for Ahmed Corporation’s expected annual volume of 500,000 units:

		Per Unit		Total
	Direct materials	$14
	Direct labour	8
	Variable manufacturing overhead	12
	Fixed manufacturing overhead			$325,000
	Variable selling and administrative expenses	5
	Fixed selling and administrative expenses			175,000

The company has a desired ROI of 35%. It has invested assets of $24,000,000.

Answer 1

(a) Total cost per unit = Direct materials + Direct labor + Variable manufacturing overhead + Fixed manufacturing overhead + Variable selling and administrative expenses + Fixed selling and administrative expenses

Total cost per unit = $14 + $8 + $12 + ($325,000/500,000 units) + $5 + ($175,000/500,000 units)

Total cost per unit = $40