Your Boss Asked You to Estimate the Required Number of Units

question 2

Short Answer

Your boss asked you to estimate the required number of units sold to achieve a profit of
$26,500 per year. Currently, the product is sold at $1800 per unit. You have collected the following information: $$\begin{array} { | l | l | } \hline \text { Cost Elements } & \text { Cost Rate } \\\hline \text { Direct labor } & \begin{array} { l } 40 \text { hours per batch of } 60 \\\text { units }\end{array} \\\hline \text { Direct labor costs } & \$ 60 \text { per hour } \\\hline \text { Material costs } & \$ 5100 \text { per batch of } 60 \text { units } \\\hline \text { Overhead costs } & 125 \% \text { of direct labor } \\\hline \text { Quality control } & 45 \% \text { of direct labor } \\\hline \text { Packaging and shipping } & \$ 33 \text { per unit } \\\hline\end{array}$$ If the units sold must account for total production costs and desired profit, how many units of production would you recommend to your boss?

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Definitions:

Normal Operations

The regular, day-to-day activities carried out by a business to generate revenue and profit.

Insurance Costs

Expenses incurred by individuals or companies for purchasing insurance coverage, which offers financial protection against losses.

Constructing a Building

The process of planning, designing, and overseeing the construction of a building, considered a capital investment for a business.

Parking Lot

An area designated for the parking of vehicles, commonly found adjacent to buildings or in urban areas.