Taylor Corporation has hired a marketing representative to sell the company’s two products: Marvelous and Wonderful. The representative’s total salary and fringe benefits are $8,000 monthly. The product cost is $75 per unit for Marvelous and $120 per unit for Wonderful. Taylor expects the representative to spend 48 hours per month marketing Marvelous and 112 hours promoting Wonderful.

Required
a. Determine the estimated total cost and cost per unit, assuming that the representative is able to sell 100 units of Marvelous and 70 units of Wonderful in a month. Allocate indirect cost on the basis of labor hours.
b. Determine the estimated total cost and cost per unit, assuming that the representative is able to sell 250 units of Marvelous and 140 units of Wonderful. Allocate indirect cost on the basis of labor hours.
c. Explain why the cost per unit figures calculated in Requirement a differ from the amounts calculated in Requirement b. Also explain how the differences in estimated cost per unit will affect pricing decisions.