Wendel stove company is developing a professional model

Assignment Help Accounting Basics

Reference no: EM13575355

Wendel Stove Company is developing a "professional" model stove aimed at the home market. The company estimates that variable costs will be $2,000 per unit and fixed costs will be $10,000,000 per year.

a.Suppose the company wants to set its price equal to full plus 30 percent. To determine cost, the company must estimate the number of units it will produce and sell in a year. Suppose the company estimates that it can sell 5,000 units. what price will the company set?

b.What is ‘odd' about setting the price based on an estimate of how many units will be sold?

c.Suppose the company sets a price as in part a, but the number of units demanded at that price turns out to be 4,000. Revise the price in light of demand for 4,000 units.

d.What will happen to the number of units that will be sold if the price is raised to the one you calculated in part c?

e.Explain why setting price by marking up cost is inherently circular for a manufacturing firm.

Reference no: EM13575355

Questions Cloud

Expected cash dividends are 250 the dividend yield is 6 : expected cash dividends are 2.50 the dividend yield is 6 flotation costs are 4 of price and the growth rate is 3.

If no new debt was issued during the year what is the cash : cusic industries had the following operating results for 2007 sales 12800 cost of goods sold 10400 depreciation

Would you be willing to but one of these bonds for 829 if : minneapolis health system has bonds outstanding that have four years remaining to maturity a coupon interest rate of 9

Determine whether master machine should make or buy the : master machine corporation incurs the following estimated annual costs in making anbsp subassembly for one of its

Wendel stove company is developing a professional model : wendel stove company is developing a professional model stove aimed at the home market. the company estimates that

Emc corporation has never paid a dividend its current free : emc corporation has never paid a dividend. its current free cash flow of 400000 is expected to grow at a constant rate

A credit card issuer charges an apr of 1082 and its billing : a credit card issuer charges an apr of 10.82 and its billing cycle is 30 days long. what is its periodic interest

A salesperson from a different computer company claims that : a salesperson from a different computer company claims that his machine which costs 85000 and has an estimated service

Work on the motel began on april 1 and ended sept 1 each : construction company headquarted in terre haute indiana built a rest easy motel 35 miles east of terre haute. the

User Account

All Pages