Fairleigh, Inc., makes children’s toys. The company uses a chain of merchandisers for retail distribution. Even though sales and production increase dramatically near the end of the year, management maintains enough manufacturing activity to keep its labor force employed year round. Data for the first quarter’s production when 60,000 toys were sold at $5 each is:

Required:
a.
b.
Give the total cost per unit sold.
Assume that direct material and commissions vary in relation to sales volume while other costs remain fixed; what profit would the company make the last quarter if it sells 100,000 toys?

c. Determine the total cost per unit sold in the last quarter.

d. List additional problems companies operating like Fairleigh would encounter.

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Direct material.. Commissions on sales. $120,000 3,000 Wages and salaries.. 38,000 Administrative expenses 25,000 Distribution expenses 24,000