What happens to the fixed cost per unit

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Reference no: EM133920526

Problem

The salespeople at Sweet, a notebook manufacturer, commonly pressured operations managers to keep costs down so the company could give bigger discounts to large customers. Paul, the operations supervisor, leaked the $0.65 total unit cost to salespeople, who were thrilled, since that was slightly lower than the previous year's unit cost. Budgets were not yet finalized for the upcoming year, so it was unclear what the target unit cost would be. Paul knew the current year's operating capacity was two million notebooks, and Sweet produced and sold just that many. The detailed breakdown of the $0.65 total unit cost is as follows. Direct material $0.15 Direct labor 0.15 Variable overhead 0.15 Fixed overhead 0.20 Total cost per unit $0.65 (a) What were Sweet's total fixed costs? If the average selling price was $2.15, how much gross margin did the company generate? Total fixed costs $ Gross margin $

If Sweet incurs exactly the same total fixed costs but produces and sells only 1,600,000 notebooks this coming year, what happens to the fixed cost per unit? In turn, what would the total cost per unit be? If the average selling price stays at $2.15, how much gross margin would be earned? (Round per unit answers to 2 decimal places, e.g. 15.25.) Fixed costs Increased by $.05 per unit Total cost per unit $ 70 per unit $ Gross margin 2,320,000.00. Get the instant assignment help.

If Sweet reworks its equipment layout and processes to increase the top end of its relevant range of activity to 2,500,000 notebooks without incurring more fixed costs, what happens to the fixed cost per unit if it is able to make and sell that larger quantity of units?

Reference no: EM133920526

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