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Questions -
Q1. Backwoods Incorporated manufactures rustic furniture. The cost accounting system estimates manufacturing costs to be $400 per table, consisting of 70% variable costs and 30% fixed costs. The company has surplus capacity available. It is Backwoods' policy to add a 50% markup to full costs. What is the lowest price per unit Backwoods should bid on this long-term order, if company follows cost plus pricing (i.e. full cost + mark-up)?
Q2. Lata Chemicals Company wants to launch a new product (L2) in the market. The product is still in final stages of design. The company expects 25% margin on selling price. The current market price of the similar product is $ 3600. The production cost of this product (L2) currently comes around $ 300 per unit. Calculate the reduction required in cost to meet the target cost per unit?
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