Question

In: Finance

A company has $30 per unit in variable costs and $1,200,000 per year in fixed costs....

A company has $30 per unit in variable costs and $1,200,000 per year in fixed costs. Demand is estimated to be 104,000 units annually. What is the price if a markup of 40% on total cost is used to determine the price?

Solutions

Expert Solution


Particulars

Per unit

Units

Total

Variable cost…….. A

      30.00

104000

       3,120,000

Fixed cost………….. B

             -  

       1,200,000

Total cost (A+B)

       4,320,000

Add: Margin @40% on Total cost

       1,728,000

Sales (Total cost + Margin)

      58.15

104000

       6,048,000

Variable cost = 104000 units x $30 = $3,120,000

Fixed cost = 1,200,000 (given)

Total cost = $4,320,000

Margin = 4320000 x 40% = $1,728,000

-----

Sales = Total cost + Margin = $4,320,000 + $1,728,000 = $6,048,000

----

Sales price = Sales / Total units = $6,048,000 / 104000 = $58.15 per unit


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