StudyXY
RegisterLog in

Analyzing Cost-Plus Pricing, Target Pricing, and Financial Impact of Cost Reductions at Radco Manufacturing

An evaluation of pricing strategies and cost reduction impact at Radco Manufacturing.

Chloe Martinez
Contributor
4.2
32
6 months ago
Preview (2 of 3 Pages)
100%
Purchase to unlock

Page 1

Analyzing Cost-Plus Pricing, Target Pricing, and Financial Impact of Cost Reductions at Radco Manufacturing - Page 1 preview image

Loading page ...

Analyzing Cost-Plus Pricing, Target Pricing, and Financial Impact of Cost Reductions atRadco ManufacturingCost-plus, target pricing, working backward. The new CEO of Radco Manufacturing has askedfor a variety of information about the operations of the firm from last year. The CEO is given thefollowinginformation, but with some data missing:Total sales revenue…………………………….....?Number of units produced and sold……………..500,000 unitsSelling price……………………………………...?Operating income………………………………$195,000Total investment in assets……………………$2,000,000Variable cost per unit……………………………...$3.75Fixed costs for the year………………………$3,000,000Required1.Find (a) total sales revenue, (b) selling price, (c) rate of return on investment, and (d) markuppercent-age on full cost for this product.2. The new CEO has a plan to reduce fixed costs by $200,000 and variable costs by $0.60 perunit whilecontinuing to produce and sell 500,000 units. Using the same markup percentage as inrequirement 1,calculate the new selling price.3. Assume the CEO institutes the changes in requirement 2 including the new selling price.However, thereduction in variable cost has resulted in lower product quality resulting in 10%fewer units being soldcompared to before the change. Calculate operating income (loss).SOLUTIONCost-plus, target pricing, working backward.1.In the following table, work backwards from operating income to calculate the selling priceSelling price$10.14 (plug)Less: Variable cost per unit3.75Unit contribution margin$6.39

Page 2

Preview Mode

This document has 3 pages. Sign in to access the full document!

Study Now!

XY-Copilot AI
Unlimited Access
Secure Payment
Instant Access
24/7 Support
Document Chat

Document Details

Subject
Finance

Related Documents

View all
Past Exams

Texas Life and Health Insurance Exam 150 Questions

A study-sharing site offering verified Q&A for the Texas Life and Health Insurance Exam. Ideal for candidates preparing for certification with updated 2023 content, covering key laws, policies, and insurance concepts.

Class Notes

Understanding Obligation and Deobligation in Resou

Obligation: legally reserving funds for expenses e.g: travel orders. Deobligation: adjusting obligations downward when actual costs are less, freeing funds for other needs. Ensures efficient effective use of finite resources in government operations.

Solved Assignments

Budgeting for Life After High School

High school budgeting activity featuring a real-life scenario for college student Lisa. Students create a zero-based budget using her income, expenses, and support funds to learn personal finance, savings, and responsible spending.

Solved Assignments

Ch 4 les 1

Zach, a college freshman, uses his new credit card with a 19% APR for emergencies during a work break, facing minimum payments that may lead to costly interest and debt.

Class Notes

Understanding Credit Reports Analyzing John's Fina

This activity uses John Doe's financial story and a sample credit report to help students learn how to read and understand credit reports. Students analyze his credit use, debts, and recent financial inquiries to answer related questions.

Solved Assignments

Financial Statement Analysis

Detailed breakdown of financial statements and key performance indicators.

Solved Assignments

CEO pay at John Deere and Caterpillar

Compares CEO pay at two companies.

Solved Assignments

Financial Planning and Budget Analysis

A financial study on budgeting techniques and financial planning strategies.

Solved Assignments

Financial Research Report

A detailed report analyzing financial trends, risk factors, and economic indicators.

Solved Assignments

WACC Project Verizon Communication Inc

This document provides a comprehensive analysis of the Weighted Average Cost of Capital (WACC) for Verizon, offering insights into financial decision-making and investment strategies.