Henderson Products is a price-setter that uses the cost-plus pricing approach. T

Question

Henderson Products is a price-setter that uses the cost-plus pricing approach. The products are specialty components used in industrial equipment. The CEO is certain that the company can produce and sell 500,000 units per year, due to the high demand for the product. Variable costs are $3.25 per unit. Total fixed costs are $860,000 per year. The target operating income for the tear is $150,000. What sales price would allow the CEO to achieve the target if the cost-plus pricing method is used?(Round your answer to the nearest cent.) Show all computations.

Explanation / Answer

Variable Cost (500000 units *3.25 per unit) = 1625000

Fixed Cost = $ 860000

Total cost = $ 2485000

Operating Income = $ 150000

So, Sales amount = $ 2635000

Sale price per unit $ 5.27

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