Question

Liliac Company sells a single product. The following information is given for current sales (2,000 units)

Sales: $50,000 ($25 per unit)

Variable expenses         $34,000 ($17 per unit)

Contribution margin     $16,000

Fixed expenses   $12,000

Profit $4,000

For the upcoming period, the company has a plan to sell 2,500 units and generate a $5,500 profit. For this plan, the company is changing the per-unit selling price of the product. Per-unit Variable expense and total fixed expense will stay the same. The new selling price should be:

$24

$27

$21

$25

$30

Answer 1

Calculation of new selling price
		Amount $
Revised Profit	a	$    5,500.00
Fixed Expense	b	$ 12,000.00
Contribution	c=a+b	$ 17,500.00
Revised sales qty	d	2500
Contribution p.u.	e=c/d	$            7.00
Variable cost p.u.	f	$          17.00
New Selling price	g=e+f	$          24.00
New Selling price is $24

· Please do upvote if you found the answer useful.

· Feel free reach in the comment section in case of any clarification or queries.