Question

A company has $6.70per unit in variable costs and $3.00 per unit in fixed costs at a volume of 50,000 units. If the company marks up total cost by 0.54, what price should be changed if 57,000 units are expected to be sold?

Round to two decimal places

Answer #1

Answer - Expected sale price per unit = $14.37

Explaination -

Step 1 - find the fixed cost per unit on expected units by dividing total fixed cost by number of units expected to sold

Total fixed cost = fixed cost per unit * 50000 units

Total fixed cost = $3 * 50000 units = $150000

So, fixed cost per units on expected sale units = $150000/57000 units = 2.63158

Step 2 - Add variable cost per unit to the fixed cost on expected unit to find total cost

Total cost = fixed cost per unit + variable cost per unit

Total cost = $2.63158 + $6.7 = $9.33158

Step 3 - Multiply the total cost by 1 + markup percentage to find sale price per unit

Sale price per unit = $9.33158 * ( 1 + 0.54 )

Sale price per unit = $9.33158 * 1.54

Sale price per unit = $14.37 ( rounded off to 2 decimals)

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