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Eddy Boardmarker Company is producing board markers. The production capacity is 100,000 units. Recently, management has become concerned about the increasing cost of making board
Eddy Boardmarker Company is producing board markers. The production capacity is 100,000 units. Recently, management has become concerned about the increasing cost of making board markers and needs to determine if the current $5 per unit selling price is adequate. The company wants to achieve a 25% gross margin. Direct materials required are ink, plastic and sponge and cost \$1 in total. Direct labor is \$6 per hour and it takes 20 minutes to finish one board marker. Variable overhead is $1.20 per direct labor hour. Fixed overhead is $100,000. Fixed selling and admin expenses are expected to be $150,000. Compute the unit cost to produce one board marker. What would you advise management regarding the selling price per unit? Round your answer to one decimal place. ANSWER BY CHOOSING THE MOST APPROPRIATE ANSWER FROM BELOW: Select one: a.Unit cost: $4.4; Selling price recommended: $5.9 b.Unit cost: $4.4;elling price recommended: $5.5 c. Unit cost: $5.9; Selling price recommended: $7.9 d.Unit cost: $5.9; Selling price recommended: $7.4 e.Unit cost: $4.4; Selling price recommended: $17.6 f.Unit cost: $5.9; Selling price recommended: $23.6 g.Unit cost:\$9.2;Selling price recommended:\$11.5 h.Unit cost:\$9.2; Selling price recommended: $36.8 i.Unit cost: $8.2; Selling price recommended: $12.3 j.Unit cost:\$8.2; Selling price recommended: $32.8
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