your boss asked you for the per unit price of a new product at 200 units and at 400 units given the following: Direct Material Cost is linear from $25/unit for 100 units to $20unit for 600 units Direct Labor Hours are 2.2 hours/unit for 100 to 299 units and 2.0hours/unit for 300 to 599 units Direct Labor Rate is $14/hour Overhead is $50/unit COGS Markup is 40%

Material Cost: $25 for 100 units and $20 for 600 units, means for each 100 units the materials cost reduces by $1
Material unit cost for 200 units = $24
Material unit cost for 400 units = $22
Labor cost = Labor hours per unit x no. of units x Direct Labor rate
Price per unit = COGS/( 1 – markup)
Quantity
200
400
Material Cost
200*24
= 4800
400*22
= 8800
Labor hours
2.2
2
Direct Labor rate
14
14
Labor cost
200*2.2*14
= 6160
400*2.2*14
= 11200
Overhead
50*200
= 10000
50*400
= 20000
COGS
4800+6160+20960
= 20960
40000
COGS per unit
20960/200
= 104.8
100
Markup (40%)
(Price per unit = COGS per unit)
174.67-104.8
= 69.87
66.67
Price Per unit (COGS/(1-Markup %)
20960/
(1 – 0.4)
= 174.67
166.67
Unit price for 200 quantity = $174.67
Unit price for 400 quantity = $166.67
 
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