durant manufacturers has performed extensive studies on its cost 274256

Durant Manufacturers has performed extensive studies on its costs and production and estimates the following annual costs based on 150,000 units (produced and sold):

Total Annual

Costs

(150,000 units)

Direct material . . . . . . . . . . . . . . . . . . . . . . . . . . $300,000

Direct labor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 270,000

Manufacturing overhead . . . . . . . . . . . . . . . . . . 225,000

Selling, general, and administrative . . . . . . . . . . 150,000

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $945,000

Required

a. Compute Durant’s unit selling price that will yield a profit of $300,000, given sales of 150,000 units.

b. Compute Durant’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.

c. Management believes that a selling price of $8 per unit is reasonable given current market conditions. How many units must Durant sell to generate the revenues (dollar sales) determined in requirement (b)?