Titan Metalworks produces a special kind of metal ingots that are unique,which allows Titan to follow a cost-plus pricing strategy.Titan has $10,000,000 of assets and shareholders expect approximately a 8% return on assets.Assume all products produced are sold.Additional data are as follows: $$\begin{array} { | l | l | l | }
\hline \text { Sales volume } & 400,000 & \text { units per year } \
\hline \text { Variable costs } & \$ 15 & \text { per unit } \
\hline \text { Fixed costs } & \$ 1,600,000 & \text { per year } \
\hline
\end{array}$$ Using the cost-plus pricing approach,what should be the sales price per unit? (Round your answer to the nearest cent.)

Question

Titan Metalworks produces a special kind of metal ingots that are unique,which allows Titan to follow a cost-plus pricing strategy.Titan has $10,000,000 of assets and shareholders expect approximately a 8% return on assets.Assume all products produced are sold.Additional data are as follows: $$\begin{array} { | l | l | l | } 
\hline \text { Sales volume } & 400,000 & \text { units per year } \
\hline \text { Variable costs } & \$ 15 & \text { per unit } \
\hline \text { Fixed costs } & \$ 1,600,000 & \text { per year } \
\hline
\end{array}$$ Using the cost-plus pricing approach,what should be the sales price per unit? (Round your answer to the nearest cent.)

Quizplus · Accepted Answer

To determine the sales price per unit using cost-plus pricing, first calculate the total cost and desired profit. Total cost = Variable costs + Fixed costs = ($15 * 400,000) + $1,600,000 = $7,600,000. Desired profit = 8% of $10,000,000 = $800,000. Total revenue needed = Total cost + Desired profit = $7,600,000 + $800,000 = $8,400,000. Sales price per unit = Total revenue needed / Sales volume = $8,400,000 / 400,000 = $21.00.

Titan Metalworks Produces a Special Kind of Metal Ingots That