Use the following to answer the questions below.
A proposal for implementing a new product line has an annual fixed cost of $60,000, variable cost of $35 per unit of output, and revenue (selling price) of $55 per unit of output.
-Refer to the instruction above. What selling price would be necessary to generate an annual profit of $90,000, if expected volume is 6,000 units per year (assume fixed costs remain at $60,000, and variable cost per unit at $35)?
A) $30 / unit
B) $40 / unit
C) $50 / unit
D) $60 / unit

Question

Quizplus · Accepted Answer

To achieve a profit of $90,000 with a volume of 6,000 units, the total revenue needed is the sum of fixed costs, variable costs, and desired profit. Fixed costs are $60,000, variable costs are $35 per unit for 6,000 units ($210,000), and desired profit is $90,000. The total needed is $360,000. Dividing this by 6,000 units gives a required selling price of $60 per unit.

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