Q.19-9SE - Horngren'S Financial And Managerial Accounting

Question

Refer to Short Exercise S19-8. Spectrum Corp. desires a 25% target gross profit after covering all product costs. Considering the total product costs assigned to the Products C and D in Short Exercise S19-8, what would Spectrum have to charge the customer to achieve that gross profit? Round to two decimal places.

Step-by-Step Solution

Answer

Price for Product C: $400.53

Price for product D: $805.33

Price for Product C

Per unit cost for product C = $300.4

 

As the target gross profit is 25%

So, the present cost should be 75% of the sales price.

 $$\begin{gathered} \mathbf{so}\mathbf{ }\mathbf{sales}\mathbf{ }\mathbf{price}\mathbf{ }\mathbf{per}\mathbf{ }\mathbf{unit}\mathbf{ }\mathbf{=}\mathbf{ }\frac{\mathbf{product}\mathbf{ }\mathbf{cost}\mathbf{ }\mathbf{per}\mathbf{ }\mathbf{unit}}{\mathbf{cost}\mathbf{ }\mathbf{percent}} \\ \mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{=}\frac{\mathbf{\$}\mathbf{300}\mathbf{.}\mathbf{4}}{\mathbf{0}\mathbf{.}\mathbf{75}} \\ \mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{=}\mathbf{\$}\mathbf{400}\mathbf{.}\mathbf{53} \end{gathered}$$

Price for Product D

Per unit cost for product D = $604

 

As the target gross profit is 25%

So, the present cost should be 75% of the sales price.

$$\begin{gathered} \mathbf{so}\mathbf{ }\mathbf{sales}\mathbf{ }\mathbf{price}\mathbf{ }\mathbf{per}\mathbf{ }\mathbf{unit}\mathbf{ }\mathbf{=}\mathbf{ }\frac{\mathbf{product}\mathbf{ }\mathbf{cost}\mathbf{ }\mathbf{per}\mathbf{ }\mathbf{unit}}{\mathbf{cost}\mathbf{ }\mathbf{percent}} \\ \mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{=}\frac{\mathbf{\$}\mathbf{604}}{\mathbf{0}\mathbf{.}\mathbf{75}} \\ \mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{ }\mathbf{=}\mathbf{\$}\mathbf{805}\mathbf{.}\mathbf{33} \end{gathered}$$