Maximum production cost per unit

jmh

Hello,

I was wondering if somone can help me with the below question, really strugling with it.

Sales:the demand is expected to avarage 5000 units a month at a selling price of 7.00 per unit
Materials: the product requires 0.5kg of material for each unit
Labour: each unit requires 6 minutes of labour at £14.00 per hour
Overheads: production over heads 10000 each month
Profit: the gross margin required is at least 25%

Calculate the MAXIMUM PRODUCTION COST PER UNIT

Thank you
jmh

davealucas

1. Start by calculating the total sales figure
2. Calculate the gross profit margin (which is 25% of the total sales figure)
3. Deduct the gross profit from the total sales figure (to give you the maximum production cost)
4. Divide the maximum production cost by the number of units produced (to give you the maximum production cost per unit)