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Problem 12-2 20 points BRuth Inc is considering expanding their business. They plan to hire a salesperson to cover trade shows. Because of compensation, travel
Problem 12-2 20 points BRuth Inc is considering expanding their business. They plan to hire a salesperson to cover trade shows. Because of compensation, travel expenses, and booth rental, fixed costs for trade show are expected to be $ 600,000 .The booth will be open 90 hours during trade shows BRuth Inc also plans to add a new product line, HRs, which will have a variable cost of $540 per package BRuth Inc will continue to sell the existing product, Singles, which will have a variable cost of $300 per package BRuth Inc believes that the salesperson will spend approximately : 22.5 hours selling Singles and 67.5 hours selling HRs Assume that the fixed costs will be allocated based on selling hours for each product. Hint : Calculate fixed cost rate per hour so you can spread fixed costs to each product Required 1. Determine the estimated total cost (including fixed and variable costs) and cost per unit of each product, assuming that the salesperson is able to sell 240 units of Singles salesperson is able to sell 150 units of HRs 2. Determine the estimated total cost (including fixed and variable costs) and cost per unit of each product, assuming that the salesperson is able to sell 600 units of Singles salesperson is able to sell 300 units of HRs 3. Explain why the cost per unit figures calculated in Requirement a are different from the amounts calculated in Requirement b. Also explain how the differences in estimated cost per unit will affect pricing decisions
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