Mini-Case: Pricing for Profit

Miller Manufacturing, Inc., produces electronic components for television circuitry. Variable costs comprise 67 percent of the product's selling price. The variable costs of producing a component include:

Direct material $1.83/unit

Direct labor $6.72/unit

Variable factory overhead $ .86/unit

Vicki Miller, President, expects to produce 80,000 electronic components and to incur

$280,000 of fixed costs.

a) If Miller desires a profit of $120,000, what price should she set?

b) What is Miller Manufacturing's break-even price?

c) What is the minimum price that Miller Manufacturing should set for its electrical

components?