A company has $6.50 per unit in variable costs and $3.20 per unit in fixed costs

Question

A company has $6.50 per unit in variable costs and $3.20 per unit in fixed costs at a volume of 50,000 units. If the company marks up total cost by 0.43, what price should be charged if 56,000 units are expected to be sold? A company has $6.50 per unit in variable costs and $3.20 per unit in fixed costs at a volume of 50,000 units. If the company marks up total cost by 0.43, what price should be charged if 56,000 units are expected to be sold? A company has $6.50 per unit in variable costs and $3.20 per unit in fixed costs at a volume of 50,000 units. If the company marks up total cost by 0.43, what price should be charged if 56,000 units are expected to be sold?

Explanation / Answer

Variable Cost = 6.50 per unit

Fixed Cost = 3.20*50000 = 160000

Fixed cost per unit for 56000 = 160000/56000 = 2.86

Total Cost = 6.50+2.86 = 9.36

Margin @ 43% = 4.02

Sales price = 9.36+4.02 = $13.38

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