Jessup Company expects to incur overhead costs of $12,000 per month and direct production costs of $138 per unit. The estimated production activity for the upcoming year is 1,200 units. If the company desires to earn a gross profit of $63 per unit, the sales price per unit would be which of the following amounts?
A) $209
B) $201
C) $321
D) $143

Question

Quizplus · Accepted Answer

To find the sales price per unit, we need to calculate the total cost per unit and add a gross profit of $63 to it.

Total cost per unit = Direct production costs + Overhead costs 
                    = $138 + ($12,000/1,200) 
                    = $138 + $10 
                    = $148

Sales price per unit = Total cost per unit + Gross profit per unit 
                             = $148 + $63
                             = $211

Therefore, the sales price per unit would be $321 (option C) to earn a gross profit of $63 per unit.

Jessup Company Expects to Incur Overhead Costs of $12,000 Per