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Question - Gulpit Limited manufactures two popular high energy drinks for dynamic business professionals, GetUpAndGo and INeedALift. Both drinks are produced on the same assembly lines and are sold in packs of 20 easy to go drinks. The sales of both drinks for 2021 are predicted to be 506 000 packs of GetUpAndGo and 644 000 packs of INeedALift. The budgeted costs for the coming year are as follows.
Both drinks incur similar variable material costs on a per pack production basis. The fixed costs are apportioned equally between both drinks. The other variable costs are allocated on a machine time basis with GetUpAndGo requiring 253 000 machine hours and INeedALift 161 000 machine hours. Gulpit directors have indicated that they require a profit of $375 600 from the GetUpAndGo line and $486 800 from INeedALift for 2021.
Variable cost
Fixed cost
Materials
$650000
$1610 000
Other
$810000
$2756 000
Required -
1) Calculate the total cost for each drink.
2) What price should be charged for each drink?
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