Part 1

Technology Inc. predicted 2017 variable and fixed costs are as follows:

Variable costs Fixed costs

Manufacturing 480,000 315900

Selling and Administrative 216,000 60500

Total 696,000 376,400

Technology Inc. produces a wide variety of computer interface devices. Per unit

manufacturing cost information about one of these products, a high-capacity flash drive is as follows:

Direct material $10

Direct labor 9

Variable Manufacturing Overhead 7

Fixed Manufacturing Overhead 9

Total manufacturing costs $35

The following is the variable selling and administrative costs for the flash drive: $6

Management has set a 2017 target profit on the flash drive of: $250,000

Required:

1. Determine the markup percentage on variable costs required to earn the desired profit

2. Use the variable cost markup to determine a suggested selling price for a flash drive. You are determining selling price per unit)

3. For the flash drive, break the markup on variable costs into separate parts for fixed costs and profit.

4. Explain what the minimum unit selling price a company would use in special order decision, if the company had excess capacity.

5. In the long run, what would be the lowest unit selling price the company would sell for? Explain your answer.