Kim, a nine-year-old, has lived with her grandmother since she was three years of age, at which time her father had abandoned the family and her mother had been sent….
What price should be set for the product?
Wilster Corporation is pricing a product that it estimates will cost $600 per unit in direct materials and $350 per unit in direct labor. Manufacturing overhead is applied to products at a rate of 120% of direct labor costs. Sixty percent of manufacturing overhead is variable. The company’s regular fixed costs will not be affected by the new product, except for the $1,000,000 in development costs and $7,000,000 in machinery. The product has an 8-year life. It should sell 3,000 units in the first year of its life, then increase by 50% each year for 3 years before falling off by 20% each year for the last 4 years of its life. Wilster prices its products to earn a 20% markup on full costs. What price should be set for the product?