The ABC Corporation is considering introducing a new product,which will require buying new equipment for a monthly payment of $5,000.Each unit produced can be sold for $20.00.ABC incurs a variable cost of $10.00 per unit.Suppose that ABC anticipates selling 100 units of the new product next month.Moreover,they would like to realize a monthly profit of $5000.What should the selling price per unit be to realize this profit?
A)$100
B)$120
C)$130
D)$115
E)$110

Question

Quizplus · Accepted Answer

To achieve a monthly profit of $5,000, ABC needs to cover the cost of the new equipment ($5,000) and the desired profit ($5,000), totaling $10,000. The variable cost per unit is $10.00, so for 100 units, the total variable cost is $1,000. Adding this to the total needed for equipment and profit ($10,000), the total revenue required is $11,000. Dividing this by 100 units, the selling price per unit needs to be $110.

The ABC Corporation Is Considering Introducing a New Product,which Will