Intel Corporation uses a cost-plus pricing strategy. The following cost data is available for a new microchip:
•Direct materials: $5,000,000
•Direct labor: $2,000,000
•Overhead: 150% of direct labor cost
•Desired profit margin: 20%
Additional Information:
•Estimated production: 1,000,000 units
Requirements:
1.Calculate the total
cost of producing the microchip. 2. Determine the cost per unit.
3.Calculate the selling price per unit using the cost-plus pricing strategy.
4.Prepare a cost sheet for the new microchip.
5.Discuss the impact of the desired profit margin on the final selling price and suggest any alternative pricing strategies.