Perry Products Is Thinking of Expanding Its Product Line The Cost of the New Product Is $95 Per Unit

question 18

Multiple Choice

Perry Products is thinking of expanding its product line.The company's current income statement is as follows: $\begin{array}{lrr}\text { Revenues } & & \$ 600,000 \\\text { Cost of goods sold: } && \\\text { Direct materials } & \$ 250,000 \\ \text { Direct labour } & 100,000 \\\text { Overhead } & \underline{80,000} & \underline{430,000}\\\text { Gross profit }& & 170,000 \\\text { Gross profit } & & \underline{ 70,000 }\\\text { Selling and administrative } & & \underline{ \$ 100,000}\end{array}$ The cost of the new product is $95 per unit made up of $50 of direct materials,$35 of direct labour and $10 of overhead per unit.What is the bid price assuming Perry utilizes a markup on direct materials?

• A)$19.77
• B)$70
• C)$119
• D)$133

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Definitions:

Trade Credit

The arrangement between businesses to buy goods or services on account, paying the supplier at a later date.

Effective Annual Cost

Effective Annual Cost denotes the total cost of financing on a yearly basis, incorporating fees and interest rates to reflect the true annual cost of borrowing.

Sole Supplier

A single source from which a company purchases goods or services, often leading to increased negotiation power for the supplier but potential risks for the buyer.

Cash Conversion Cycle

A metric that measures the time span between a company's outlay of capital for supplies and receiving payment from the sale of those goods or services.