Camelback: Costs and Product

Satisfactory Essays
Case Study: Camelback Communications:

Questions

1. What will CCI now have to charge for each product to make a 40% mark-on?
If CCI maintains its rule about dropping products with a mark-on below 25%, which additional products, if any, will it drop?

To have a charge for each product, first the standard costs are calculated, based on the new allocation rate ($10.36):

|Product |B |C |D |
|Material |5,00 |10,00 |5,00 |
|Labor |5,00 |15,00 |10,00 |
|Allocated cost |10,36 |31,08 |20,72 |
|Standard cost |$20,36 |$56,08 |$35,72 |

The next table shows the calculation of the selling price with a 40% mark-on:

|Product |B |C |D |
|Standard cost |20,36 |56,08 |35,72 |
|40% mark-on |8,144 |24,43 |14,28 |
|Selling Price |$28,50 |$78,51 |$50,00 |

Calculation of industry prices using actual production costs:

|Product |B |C |D |
|Standard cost |27,5 |42,5 |35 |
|40% mark-on |11 |17 |14 |
|Selling price |$38,50 |$59,50 |$49,00 |

|Product |B |C |D |
|Selling price |38,5 |59,5 |49 |
|Standard cost |20,36 |56,08 |35,72 |
|Profit |18,14 |3,42 |13,28 |
|Mark-up |89% |6% |37% |

The results of the calculation show that product C, with a mark-up level of

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