Determine the maximum profit margin

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Reference no: EM131286223

An electronics manufacturing company is planning to introduce a new product in the market. The best competitor sells a similar product at $420/unit. Other pertinent data are as follows:

Production hours: 2.61 hours /unit

Direct labor cost: $15.00/hour

Factory overhead: 120% of direct labor

Production materials: $300/unit

Packing cost: 20% of direct labor

The profit margin is based on the total manufacturing costs.

(a) using the information given, determine the maximum profit margin that the company can have so as to remain competitive.

(b) if the company desires a profit margin of 15%, can the target cost be achieved? If not, suggest two ways in which the target cost can be achieved.

Reference no: EM131286223

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