The Falling Snow Company is considering production

Business & Finance
Price: $5 USD

Question description

The Falling Snow Company is considering production of a lighted world globe that the company would price at a markup of 0.30 above full cost. Management estimates that the variable cost of the globe will be $64 per unit and fixed costs per year will be $240,000.

Assuming sales of 1,200 units, what is the full selling price of a globe with a 0.30 markup?

A company believes it can sell 5,500,000 of its proposed new optical mouse at a price of $10.50 each. There will be $8,000,000 in fixed costs associated with the mouse. If the company desires to make a profit $2,000,000 on the mouse, what is the target variable cost per mouse?

Wizard Corporation has analyzed their customer and order handling data for the past year and has determined the following costs:

Order processing cost per order


Additional costs if order must be expedited (rushed)


Customer technical support calls (per call)


Relationship management costs (per customer per year)


In addition to these costs, product costs amount to  75% of Sales.

In the prior year, Wizard had the following experience with one of its customers, Chester Company:



Number of orders


Percent of orders marked rush


Calls to technical support



Calculate the profitability of the Chester Company account.

PowerDrive, Inc. produces a hard disk drive that sells for $175 per unit. The cost of producing 25,000 drives in the prior year was:
Direct material$625,000
Direct labor375,000
Variable overhead125,000
Fixed overhead1,500,000
Total cost$2,625,000
At the start of the current year, the company received an order for 3,800 drives from a computer company in China. Management of PowerDrive has mixed feelings about the order. On the one hand they welcome the order because they currently have excess capacity. Also, this is the company’s first international order. On the other hand, the company in China is willing to pay only $125 per unit.

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