Question
Williams Inc. produces a single product, a part used in the manufacture of automobile transmissions. Known for its quality and performance, the part is sold
Williams Inc. produces a single product, a part used in the manufacture of automobile transmissions. Known for its quality and performance, the part is sold to luxury auto manufacturers around the world. Because this is a quality product, Williams has some flexibility in pricing the part. The firm calculates the price using a variety of pricing methods and then chooses the final price based on that information and other strategic information. A summary of the key cost information follows. Williams expects to manufacture and sell 57,000 parts in the coming year. While the demand for Williamss part has been growing in the past 2 years, management is not only aware of the cyclical nature of the automobile industry, but also concerned about market share and profits during the industrys current downturn.
Total Costs | |||
Variable manufacturing | $ | 4,666,000 | |
Variable selling and administrative | 841,650 | ||
Facility-level fixed overhead | 2,331,875 | ||
Fixed selling and administrative | 661,495 | ||
Batch-level fixed overhead | 346,000 | ||
Total investment in product line | 22,336,000 | ||
Expected sales (units) | 57,000 | ||
Could you please answer the rest of the questions
5. Determine the price for the part using a desired before-tax return on investment of 11%.
Price per unit
6. Determine the total contribution margin and total operating profit for each of the methods in requirements 1 through 5.
Makeup on full manufacturing cost contribution margin operating profit
Makeup on life cycle costs contribution margin operating profit
Price to achieve desired GM% contribution margin operating profit
Price to achieve desired LCC% contribution margin operating profit
Price to achieve desired ROA of 11% contribution margin operating profit
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