A company expects to produce and sell 10,000 units o


MC Qu. 64 A company expects to produce and sell ...
A company expects to produce and sell 10,000 units of a single product. Management desires a 20% return on assets of $1,400,000. The following additional company information is available:
 
  Variable costs (per unit)
     Production costs $70
     Nonproduction costs $12
  Fixed costs (in total)
     Overhead $97,000
     Nonproduction $23,000
 
Compute selling price per unit given that markup percentage equals desired profit divided by total costs.

$82.0

$94.0

$28.0

$122.0

$110.0   
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    Best answer
  • M V N D BHAVANI
    M V N D BHAVANI answered this 29 minutes later
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    229 answers • 66% Best Answer
    Total Cost Per Unit = (Variable Cost Per Unit)+(Total Fixed Costs\div Number of Units Produced)
    Total Cost Per Unit = (70+12)+(97,000+23,000\div10,000)
    Total Cost Per Unit = 82+(120,000\div10,000)
    Total Cost Per Unit = 82+12
    Total Cost Per Unit = 94
    Mark Up Percentage = (1,400,000\times 0.2)\div 940,000
    Mark Up Percentage = 280,000\div 940,000
    Mark Up Percentage = 0.2979
    Mark Up Per Unit= 0.2979\times 94
    Mark Up Per Unit= 28.00
    Selling Price Per Unit = Total Cost Per Unit+Mark Up Per Unit
    Selling Price Per Unit = 94+28
    Selling Price Per Unit = 122
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  • Rajesh Iyer
    Rajesh Iyer answered this 37 minutes later
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    16 answers • 67% Best Answer
    Computation of selling price per unit
    Company desired to have a return of 20% on its assets of $ 1400000
    Which means that they expect to have profit value of $ 1400000*20% - $ 28000
    Particulars Amount
    Desired profit from above $ 28000
    Add - Fixed overheads ( production & Non production) $ 120000
    Add - Variable cost - production ($ 70* 10000) $ 700000
    Add - Variable cost - non production ($ 12* 10000) $ 120000
    Total sale value in $ $ 968000
    Total Sale in units 10000
    Sale value per unit $ 96.8
    To derive profit percent of 20%
    = Sale per unit - Cost per unit
    = 96.8 - 94 ( $70+$12+(97000+23000/10000) = $2.8 per unit profit
    Total profit = $ 2.8 per unit profit * 10000 number of units = $ 28000 total as derived above and as desired by company.
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