A firm has unit costs of $10 per unit.The investment in capital for the production of the product is $2 million,expected unit sales are 100,000 units,and a desired rate of return on their investment is15%.Calculate the return price.

Question

Quizplus · Accepted Answer

The return price is calculated as follows:Return price = Unit costs + (Investment in capital * Desired rate of return) / Expected unit salesReturn price = $10 + ($2 million * 15%) / 100,000 unitsReturn price = $10 + $300,000 / 100,000 unitsReturn price = $10 + $3Return price = $13

A Firm Has Unit Costs of $10 Per Unit