Question
Olive Company sold 34,000 units of its one and only product at $18.20 per unit. Manufacturing and selling the product costed $298,000 fixed cost. Per
Olive Company sold 34,000 units of its one and only product at $18.20 per unit. Manufacturing and selling the product costed $298,000 fixed cost. Per Unit variable costs below.
Direct Materials | 3.90 |
Direct Labour | 2.90 |
Variable overhead cost | 0.39 |
Variable selling&admin costs | 0.19 |
Next year the company will reduce costs, this inturn will reduce direct materials costs to 1.95 per unit and reduce direct labor costs to 1.45 per unit. sales, total fixed costs, variable overhead costs per unit, and variable selling and admin costs per unit will not change. Management is also considering raising its selling price to 21.84 per unit, which would decrease unit sales volume to 32,300 units.
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