Tan Choo Company produces a single product in its Singapore plant, which currently sells for $15 per unit. Fixed costs are expected to amount to $180 000 for the year, and all variable manufacturing and administrative costs are expected to be incurred at a rate of $9 per unit. Tan Choo has two salespeople who are paid strictly on a commission basis. Their commission is to per cent of the sales dollars they generate. (Ignore income taxes.)
1. Suppose that management alter their current plans by spending an additional amount of $15 000 on advertising, and increase the selling price to $18 per unit. Calculate the profit on 60 000 units
2. The Sunshine Company has just approached Tan Choo to make a special one-time purchase of 10 000 units. These units would not be sold by the sales personnel and, therefore, no commission would have to be paid. What is the price Tan Choo would have to charge per unit on this special order to make an additional profit of $30 000?