Part 4
USB Inc. predicted 2018 variable and fixed costs are as follows:					Company budgeted for:		43,200	Units
		Variable costs	Fixed costs
	Manufacturing	734,400	172,800
	Selling and Administrative	216,000	60,500
	Total	950,400	233,300
USB 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	$6
	Direct labor	8
	Variable Manufacturing Overhead	3
	Fixed Manufacturing Overhead -allocated per unit	4
	Total manufacturing costs	$21
The following is the variable selling and administrative costs for the flash drive:					$5
Management has set a 2018 target profit on the flash drive of:					$200,000

Required: Make sure you show your work or use cell references for all calculations. You will not earn credit if you just type in your answer.

1. Determine the markup percentage on total variable costs required to earn the desired profit-46%

2. Use the variable cost markup you determined in #1 above to determine a suggested selling price for a flash drive. You are determining selling price per unit.
	Selling price is based on total variable cost plus markup from #1 above.
	Total variable cost per unit	$22.00
	Markup above total Variable cost	$ 10.03
	Selling price per unit	$32.03
3. For the flash drive, break the markup determined in #2 above on variable costs into separate parts for fixed costs and profit.
	Markup for fixed costs
	Markup for profit
	Total Markup which should agree with what you calculated in #2 above for markup above variable cost

3. For the flash drive, break the markup determined in #2 above on variable costs into separate parts for fixed costs and profit.
	Markup for fixed costs	$5.40
	Markup for profit	$4.63
	Total Markup which should agree with what you calculated in #2 above for markup above variable cost	$10.03
4. Explain what the minimum unit selling price a company would use in special order decision, if the company had excess capacity.
If the company had excess capacity, then the minimum selling price for the special order will be its variable cost per unit which is $22. The fixed costs are not taken into consideration because they have already been allocated to the 43,200 units so they would not be charged again on additional production and become irrelevant.

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