Trailrider Corporation manufactures part no. 67, which is used in the production of mountain bikes. Per-unit information about part no. 67 follows.

Trailrider has traditionally used a 20% markup on total cost to arrive at a reasonable selling price. The company, though, has noticed a sizable drop in sales volume during the last few quarters, which it attributes to new entrants in the marketplace.
Required:
A. Compute the current selling price of part no. 67.
B. If management desired to meet the prevailing market price and maintain the current rate of profit on sales, what must happen to the company's total manufacturing costs? By how much?

Question

Trailrider Corporation manufactures part no. 67, which is used in the production of mountain bikes. Per-unit information about part no. 67 follows.
  
Trailrider has traditionally used a 20% markup on total cost to arrive at a reasonable selling price. The company, though, has noticed a sizable drop in sales volume during the last few quarters, which it attributes to new entrants in the marketplace. 
Required:
A. Compute the current selling price of part no. 67.
B. If management desired to meet the prevailing market price and maintain the current rate of profit on sales, what must happen to the company's total manufacturing costs? By how much?

Quizplus · Accepted Answer

The Answer of Trailrider Corporation manufactures part no. 67, which is used in the production of mountain bikes. Per-unit information about part no. 67 follows.
  
Trailrider has traditionally used a 20% markup on total cost to arrive at a reasonable selling price. The company, though, has noticed a sizable drop in sales volume during the last few quarters, which it attributes to new entrants in the marketplace. 
Required:
A. Compute the current selling price of part no. 67.
B. If management desired to meet the prevailing market price and maintain the current rate of profit on sales, what must happen to the company's total manufacturing costs? By how much?

Trailrider Corporation Manufactures Part No