Question

GoSnow sells snowboards. Each snowboard requires direct materials of $110, direct labor of $35, and variable overhead of $45. The company expects fixed overhead costs of $265,000 and fixed selling and administrative costs of $211,000 for the next year. The company has a target profit of $200,000. It expects to produce and sell 10,000 snowboards in the next year. Compute the selling price using the variable cost method.

Answer 1

Answer:

See below

Explanation:

Given the above information,

We need to calculate first the total contribution margin.

Contribution margin = Net profit + Total fixed expense

= $200,000 + ($265,000 + $211,000)

= $200,000 + $476,000

= $676,000

Now, we will calculate the total variable expense

Total variable cost

= 10,000 × ($110 + $35 + $45)

= 10,000 × $190

= $1,900,000

Finally, compute the total sales and the unitary cost

Total sales = Contribution margin + Total variable cost

= $676,000 + $1,900,000

= $2,576,000

Unitary selling price = $2,576,000/10,000 = $257.6