The Health Products Company makes a hot water bottle in one factory. Budgeted revenue and cost data relating to operations for the coming year are:
Sales (230,000 bottles) $4,600,000
Cost of sales 2,760,000
Gross profit 1,840,000
Selling & administrative expenses 1,150,000
Income 690,000
The factory has capacity to make 250,000 bottles per year. The fixed production costs (included in cost of goods sold) are $920,000. The variable selling, and administrative costs are a 10% sales commission and a $1.00 per bottle licensing fee paid to the designer.