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Question - Assume that Gagnon produces one type of product, which is sold on a bid basis. In years 1 and 2 the average bid was $400. In Year 1 total variable cost was $250 per unit. In year 1 Competition forced the bid to drop to $320.
Required -
A. Compute the total contribution margin in Year 3 using the same percentage of quality costs in year 1 (25%).
B. Now compute the total contribution margin in year 3 using the actual quality cost for year 3 (18%) Sales revenue for year 3 is 22,000,000.
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Prepare a statement of cost and calculate the selling price per unit which will result in 25 % on the sale price
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