# Pricing, Break-Even, and Marginal Analysis,

**Topics:**Variable cost, Management accounting, Costs

**Pages:**3 (611 words)

**Published:**December 10, 2012

* Answer questions from Appendix 2, sections on Pricing, Break-Even, and Marginal Analysis, page A-11 through A-16, answer questions 1.1, 1.2, 1.3, 1.4 and 1.5 from page A-16. * Show the formulas used to calculate the answers for these questions.

1.1: Sanborn, a manufacturer of electric roof vents, realizes a cost of $55 for every unit it produces. Its total fixed costs equal $2 million. If the company manufactures 500,000 units compute the following:

a) unit cost- unit cost = variable cost + fixed cost/unit sales

x= $55 + $2,000,000/500,000 = $59 unit cost

b) markup price if the company desires a 10% return on sales- unit cost/(1 – desired return on sales) $59/(1 - .10) = $65.56

c) ROI price if the company desires a 25% return on an investment of $1 million

ROI price = unit cost + ROI x investment/unit sales

$55 + .25 x 1,000,000/500,000 = $55.5

1.2: An interior decorator purchases items to sell in her store. She purchases a lamp for $125 and sells it for $225, Determine the following:

a) dollar markup=: selling price – cost: $225-125 = $100

b) markup percentage on cost: dollar markup/cost $100/$125 = 80%

c) markup percentage on selling price: dollar markup/selling price $100/$225 = 44%

1.3: A consumer purchases a toaster from a retailer for $60. The retailers markup is 20%, and the wholesalers markup is 15%, both based on selling price. For what price does the manufacturer sell the product to the wholesaler?

Purchase price: $60

Retailer markup: 20%

Wholesale markup: 15%

Markup % on price = price – cost/price

Cost at each level = price – (price x markup %)

$60 – ($60 x .2) = $48, the price the wholeseller sells at to the retailer $48 – ($48 x .15) - $40.80, the price that the manufacturer sells at to the wholeseller

1.4: A vacuum manufacturer has a unit cost of $50 and wishes to achieve a margin of 30% based on selling price. If the manufacturer sells directly to a retailer who then...

Please join StudyMode to read the full document