Reference no: EM132486897

Question - CP CPA is considering expanding her business. She plans to hire a salesperson to cover trade shows. Because of compensation, travel expenses, and booth rental, fixed costs for a trade show are expected to be $ 700,000 . The booth will be open for a 105 hours during the trade show. CP CPA also plans to add a new product line. Basehits, which will have a variable cost of $630 per package. SHe will continue to seel the existing product, Noerrors, which will have a variable cost of $350 per package. CP Cpa believes that the salesperson will spend approximately: 26.25 hours selling Noerrors and 78.75 hours selling Basehits.

Assume that the fixed costs will be allocated based on selling hours for each product. Hint: Calculate fixed cost rate per hour so you can spread fixed costs to each product.

Required -

1. Determine the estimated total cost (including fixed and variable costs) and cost per unit of each product, assuming that the salesperson is able to sell 280 units of Noerrors salesperson is able to sell 175 units of Basehits.

2. Determine the estimated total cost (including fixed and variable costs) and cost per unit of each product, assuming that the salesperson is able to sell 700 units of Noerrors salesperson is able to sell 350 units of Basehits.

3. Explain why the cost per unit figures calculated in Requirement a are different from the amounts calculated in Requirement b. Also explain how the differences in estimated cost per unit will affect pricing decisions.