Orange Inc. incurs the following costs each period: $$\begin{array} { l l }
\text { Variable manufacturing costs per unit } & \$ 10 \
\text { Variable selling costs per unit } & \$ 2 \
\text { Total fixed manufacturing costs } & \$ 18,530 \
\text { Total fixed selling costs } & \$ 41,370
\end{array}$$ If the company sells 6,000 units, what price must be charged to earn a pre-tax profit of $25,000?

Question

Orange Inc. incurs the following costs each period: $$\begin{array} { l l } 
\text { Variable manufacturing costs per unit } & \$ 10 \
\text { Variable selling costs per unit } & \$ 2 \
\text { Total fixed manufacturing costs } & \$ 18,530 \
\text { Total fixed selling costs } & \$ 41,370
\end{array}$$ If the company sells 6,000 units, what price must be charged to earn a pre-tax profit of $25,000?

Quizplus · Accepted Answer

To earn a pre-tax profit of $25,000, the total revenue needed can be calculated by adding the total costs and the desired profit. The total variable costs for 6,000 units are $(10 + 2) * 6000 = $72,000. The total fixed costs are $18,530 + $41,370 = $59,900. Therefore, the total costs are $72,000 + $59,900 = $131,900. Adding the desired profit of $25,000, the total revenue needed is $131,900 + $25,000 = $156,900. To find the price per unit, divide the total revenue by the number of units: $156,900 / 6,000 = $26.15.

Orange Inc If the Company Sells 6,000 Units, What Price Must Be