Jason Craven (JC) Incorporated is a public company that produces and distributes high quality surround sound speakers. The companys suppliers provide a deep discount if it makes large purchases. As a result, JCs production volume is often greater than its sales volume for a given period. The company uses the cost plus pricing system to determine the appropriate selling price for its speakers.
	2021 production in units				130,000
	2021 sales in units				60,000
	Variable Cost per Unit
	Direct Materials				$ 12.50
	Direct Labor				$ 22.00
	Variable Manufacturing Overhead Costs				$ 9.00
	Variable General and Administrative Costs per unit sold				$ 6.00
	Annual Fixed Costs
	Fixed Manufacturing Overhead Costs				$ 650,000
	Fixed General and Administrative Costs				$ 75,000
	Mark-up percentage
	Variable Cost Base				40%
	Absorption Cost Base				30%
Part a) Calculate the selling price for each of the two pricing strategies (i.e. using the variable manufacturing cost or the absorption cost as the base).
Using Variable Manufacturing Cost as the Base:
Using Absorption Cost as the Base:
Part b) For each of the selling prices calculated in part a), create an income statement to determine income from operations.
Jason Craven Incorporated
Income Statement-Var Mfg as Base of Markup
For the Year Ending December 31, 2021
Jason Craven Incorporated
Income Statement-Absorption as Base of Markup
For the Year Ending December 31, 2021
Which selling price will generate the highest income?
Part c) Using the target costing method along with the following information, decide whether or not the company should set the price at the max selling price.
Sales Manager's estimate of Max Selling Price						$ 70
Estimated Unit Sales at Max Selling Price						60,000
Initial Investment						$ 1,750,000
Required rate of return						25%
Calculate:
Target Cost
Total Cost
Should the company set the price per speaker at $60?