Maple Inc.manufactures a product that costs $45 per unit plus $50,000 in fixed costs each month.Maple currently sells 5,000 of these units per month for $60 each.If Maple leased a machine for $30,000 a month,it could add features to the product that would allow it to increase the selling price.It would cost an additional $10 per unit to add these features.How much would Maple have to charge for the product with additional features to make it worthwhile to lease the machine?
A)$55
B)$60
C)$71
D)$76

Question

Quizplus · Accepted Answer

To make leasing the machine worthwhile, Maple Inc. must cover the additional costs without reducing profit. The current profit is calculated as follows: Revenue = 5,000 units * $60/unit = $300,000. Total variable costs = 5,000 units * $45/unit = $225,000. Fixed costs = $50,000. Total cost = $225,000 + $50,000 = $275,000. Profit = $300,000 - $275,000 = $25,000. With the machine, fixed costs increase by $30,000, and variable costs per unit increase by $10. New total cost = ($45 + $10) * 5,000 + $50,000 + $30,000 = $325,000. To maintain the $25,000 profit, new revenue must be $325,000 + $25,000 = $350,000. Therefore, the new price per unit must be $350,000 / 5,000 units = $70. To make it worthwhile, the price must be higher than $70, so the correct answer is $76 (D).

Maple IncManufactures a Product That Costs $45 Per Unit Plus $50,000