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Sound City is a major producer of top level professional electric violins. The data given below relates to its best-selling model, D18:
Variable cost per unit $
Direct materials 230
Direct labour 190
Total fixed cost for the year
Factory overheads 196 796
Advertising 55 000
Administrative expenses 68 000
Selling price per unit 2 999
Question a) What is the contribution per unit?
Question b) What is the break-even point in units per year?
Question c) Calculate the number of units that must be sold to generate a profit of $90 000 per year (round to the nearest integer)? Assume that costs and selling price remain constant.
What costs are relevant to each of the three alternatives: offshoring, relocating functions, and automating functions?
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