Valade Company produces two products, J and K. Estimates costs are presented below for a year in which
10,000 units of each product are expected to be sold:
An annual profit of $280,000 for the whole company is considered satisfactory. The company uses the same profit margin ( as a percentage of costs) to arrive at the price for both products
a. Calculate normal selling price for product J and K.
b. Using the prices calculated above, how much profit would result if the sales were 5,000 units of J and 15,000 units of K instead of 10,000 units each?
c. Comment on the effect of changes in the product mix on total profit when the same profit margin percentage is used.
TotalProduct JProduct kDirect Production Cost$ 700,000.00$ 400,000.00$ 300,000.00Overhead Cost280,000160,000120,000Selling & Administrative cost140,00080,00060,000