Ramanan, Inc., has performed cost studies and projected the following annual costs based on 200,000 units of production and sales:
Total Annual Costs (200,000 units)
Direct Material …………………………………………………………………… $ 400,000
Direct Labor…………………………………………………………………………. 360,000
Manufacturing Overhead……………………………………………………….. 300,000
Selling, General, and Administrative……………………………………….. 200,000
Total………………………………………………………………………………… $1,260,000
a. Compute Ramanan’s unit selling price that will yield a profit of $300,000, given sales of 200,000 units.
b. Assume management selects a selling price of $8 per unit. Compute Ramanan’s dollar sales that will yield a projected 20 percent profit on sales, assuming variable costs per unit are 60 percent of the selling price per unit and fixed costs are $420,000.