Using the variable cost concept, determine the selling price for 30,000 units using the following data: Variable cost per unit
$15)00
Total fixed costs
$90,000
Desired profit
A) $10 $150,000
B) $15
C) $8
D) $23

Question

Quizplus · Accepted Answer

To determine the selling price for 30,000 units using the variable cost concept, we need to use the following formula:

Selling Price = Variable Cost per Unit + (Total Fixed Costs / Number of Units) + Desired Profit per Unit

Variable Cost per Unit = $15.00
Total Fixed Costs = $90,000
Number of Units = 30,000
Desired Profit per Unit = $5.00 (since the desired profit is $150,000 and there are 30,000 units, the desired profit per unit is $150,000 / 30,000 = $5.00)

Using the formula above, we get:

Selling Price = $15.00 + ($90,000 / 30,000) + $5.00
Selling Price = $15.00 + $3.00 + $5.00
Selling Price = $23.00

Therefore, the best choice is D, which is $23.00, because it takes into account the variable cost, fixed costs, and desired profit per unit.

Using the Variable Cost Concept, Determine the Selling Price for 30,000