Excel Manufacturing Is Planning to Make and Sell 5,000 Units

question 19

Essay

Excel Manufacturing is planning to make and sell 5,000 units of its only product, Excel-A. Excel is considering a variety of methods to determine the price of the order. Some key information about Excel follows: Required:
1. Determine the price using the markup of 40% of full manufacturing costs.
2. Determine the price using a 20% markup on life cycle costs.
3. Determine the price assuming a desired 50% gross margin percentage.
4. Determine the price assuming a desired 30% return on life cycle costs.
5. Determine the price assuming a desired 20% return on investment.

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Definitions:

Acceptable Price Range

The range of prices within which buyers and sellers are willing to transact, often determined by market conditions and personal valuation.

Commodity Grade

A classification standard that specifies the quality and condition of commodities to ensure they meet minimum standards for trading.

Basis

The difference between the spot price of an asset and the futures price of the same asset.

Long Hedger

An investor who purchases futures contracts or the underlying asset to protect against potential price increases.