Academic Wiki

P4-2a

1. Royale: 450,000 (purchase orders); 250,000 (machine setups); 3,000,000 (machine hours); 250,000 (inspections) = $3,925,000

Majestic: 750,000 (purchase orders); 650,000 (machine setups); 1,800,000 (machine hours); 475,000 (inspections) = $3,675,000

2. Royale:  Cost per unit – 700 + 120 + 157 = $977

Majestic: Cost per unit – 420 + 100 + 367.5 = $887.5

Gross profit = 1600 – 977 = $623 (Royale)

Gross profit = 1300 – 887.5 = $412.5 (Majestic)

3. Royale: 39 percent profit margin.

Majestic: 31 percent profit margin.

The Royale delivers more profit margin per device than the Majestic.