Question

Please show work!

Brislin Products has a new product going on the market next year. The following data are projections for production and sales:

Variable costs	$250,000
Fixed costs	$450,000
ROI	14%
Investment	$2,000,000
Sales	200,000 units

What is the target selling price per unit?

$2.65

$4.90

$3.50

$3.65

What would the markup percentage be if only 150,000 units were sold and Brislin still wanted to earn the desired ROI?

32.95%

53.33%

35.00%

44.00%

Answer 1

(a) Target selling price per unit =$4.90

Total Unit cost = ($250000+$450000) / 200000 = $3.50

ROI / Total Unit Cost = Markup %

1.40 / 3.50 = 40%

Target Selling Price = Total Unit Cost + ( Total Unit Cost x Markup)

= 3.5 + (3.5 x 40%)

= $4.90

(b) Markup percentage = 32.95%

Percentage change in units = (50000/200000) * 100 = 25%

New Variable Cost per unit     = ($250000/200000) * 0.75 = 0.9375

Fixed Cost per unit                  = $450000/200000 = $2.25

Total Cost                              = $0.9375 + $2.25 = $3.1875

Markup % = ROI / Total Unit Cost

                   =1.4 / $3.1875    

                   = 44%