Reference no: EM13890765

ABC company is preparing its budget for the coming year. They manufacture two specialized products, a backpack and a tent. They estimate they will incur the following costs:

For the backpack:

Direct materials            $110,000

Direct labor                  90,000

Overhead                     80,000

Selling & admin.            45,000

For the tent:

Direct materials            82,500

Direct labor                  67,500

Overhead                     60,000

Selling and admin.         30,000

The company believes it will sell 5,000 units of each product. They wish to make profit of $300,000. The company maintains the same profit margin (as a percent of costs).

a. Calculate the normal selling price for each product?

b. What would net income be if unit sales of the tent increased by 50% but unit sales of the backpack increased by only 20%?