Question
In an attempt to win over key customers in the motor industry and to increase its market share, Extreme Motor Components plc has decided to
In an attempt to win over key customers in the motor industry and to increase its market share, Extreme Motor Components plc has decided to charge a price lower than its normal price for component TD463 when selling to the key customers who are being targeted. Based on a batch size of 200 units, details of component TD463's standard costs are as follows:
Machine X | Machine Y | Machine Z | Assembly | |
Materials (per unit) | 26.00 | 17.00 | 3.00 | |
Labour (per unit) | 2.00 | 1.60 | 0.75 | 1.20 |
Variable production overheads (per unit) | 0.65 | 0.72 | 0.80 | 0.36 |
Fixed production overheads (per unit)0 | 3.00 | 2.50 | 1.50 | 0.84 |
Subtotal | 31.65 | 21.82 | 3.05 | 5.40 |
Setting-up costs (per batch of 200 units ) | 10.00 | 6.00 | 4.00 |
The company incurs selling and distribution costs of 150.00 per batch.
Required:
Compute the lowest selling price at which one batch of 200 units could be offered. State any assumptions you make.
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