Question
You are the Chief Financial Officer (CFO) of XYZ Manufacturing Company. Your company primarily produces and sells a popular model of headphones named SoundWave'. Currentiy,
You are the Chief Financial Officer (CFO) of XYZ Manufacturing Company. Your company primarily produces and sells a popular model of headphones named "SoundWave'. Currentiy, you sell each unit of Soundwa to your distributors at a regular selling price of $100
The cost breakdown for each unit of SoundWave is as follows:
Direct Material: $25
Direct Labor: $15
Variable Overhead: $10
Fixed Overhead: $20 (based on a normal volume of 500,000 units per year)
Your total annual fixed overhead is $10,000,000.
A new potential client, BigMart, a large retail chain, is interested in purchasing a special bulk order of 100,000 SoundWave headphones but is asking for a discounted price due to the volume. They are willing to pay $70 per unit. They also request a special design on the headphones which will cost an additional $3 per unit in direct materials.
A) What is the total variable cost per unit of the SoundWave headphones?
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