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Problem 12-2 20 points Speaker Inc is considering expanding their business. They plan to hire a salesperson to cover trade shows. Because of compensation,
Problem 12-2 20 points Speaker 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 $ 2,000,000 The booth will be open Speaker Inc also plans to add a new product line, HRS, which will have a variable cost of Speaker Inc will continue to sell the existing product, Singles, which will have a variable cost of Speaker Inc believes that the salesperson will spend approximately: 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 300 $1,500 hours during trade shows per package $7,500 100 per package hours selling Singles and 200 hours selling HRS 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 salesperson is able to sell 800 units of Singles 500 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 salesperson is able to sell 2000 units of Singles 1000 units of HRs 3. Explain why the cost per unit figures calculated in Requirement 1 are different from the amounts calculated in Requirement 2. Also explain how the differences in estimated cost per unit will affect pricing decisions.
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