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. An umbrella manufacturer marks an average net profit of $2.50 per piece on a selling price of $14.30 by producing and selling 6,000 pieces
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An umbrella manufacturer marks an average net profit of $2.50 per piece on a selling price of $14.30 by producing and selling 6,000 pieces or 60% of the capacity. His cost of sales is $ Direct material 3.50 Direct wages 1.25 Works overheads (50% fixed) 6.25 Sales overheads (25% variable) 0.80 During the current year, he intends to produce the same number but anticipates that fixed charges will go up by 10% which direct labour rate and material will increase by 8% and 6% respectively but he has no option of increasing the selling price. Under this situation, he obtains an offer for further 20% of the capacity. What minimum price you will recommend for acceptance to ensure the manufacturer an overall profit of $16,730Step by Step Solution
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