Calculation Of Estimated Profit Margin

Question

Terracotta Ltd – Newly introduced products under review

Coal Flyash – Coal flyash bricks are made from coal-burning waste. These bricks reduce raw material cost for Terracotta Ltd and reduce waste disposal costs for power plants. The bricks are designed to have better color, physical consistency, weight, compressive strength and thermal conductivity than standard bricks.

Colourbrix – Colourbrix has a range of new and vibrant colors. They do not need to be rendered or painted because the color is infused into the brick. Colourbrix pricing strategy:

Sales price per unit (1000 bricks)                   $5750
Expected variable costs per unit                     $3120
Fixed overhead costs to be allocated               $2700,000
Estimated unit sales in the first year                4000 units
Desired profit margin                                     40 percent

What is the estimated profit margin for Colourbrix?

A. 34 percent
B. 40 percent
C. 46 percent
D. 54 percent

Summary

This multiple choice question belongs to Corporate Strategy and it discusses about the estimated profit margin for Colourbrix.

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