Question

32. Alton Benes paints graduation pictures and then sells them in expensive frames.   His average selling price is $299 per painting.   Variable costs to deliver a painting are $29 each and Alton’s fixed costs are $2,000 per month. Alton currently sells 30 paintings per month and he cannot increase the number of paintings sold per month, due to a lack of available time.   If Alton wants to generate a profit of $10,000 per month, what would his average selling price per unit need to be?

A. $130

B. $429

C. $270

D. $400

Answer 1

For calculating the average selling price per unit, first, we will calculate the total cost of 30 paintings, and then we will add the required profit which will give us the total sales value.

If we divide the sales from the number of units sold we will get the average selling price per unit.

Computation of average selling price per unit need to generate $10,000 profit:

Particulars		Amount
Total Variable Costs	A	$870
(30 paintings * $29)
Total Fixed Costs	B	$2,000
Total Costs	C=A+B	$2,870
Add: Desired Profit	D	$10,000
Required sales value	E=C+D	$12,870
No of paintings to be sold	F	$30
Average Selling Price Per Unit	G=E/F	$429

Therefore, option B i.e $429 is the correct answer.