The unit cost of a product is $10.$2 million is invested in capital for the production of the product,and the expected sales are 100,000 units.How much would the target return price change if the desired rate of return on the investment is raised from 15% to 20%?

Question

Quizplus · Accepted Answer

Initially, the desired return on investment (ROI) is 15% of $2 million, which is $300,000. With a 20% ROI, the desired return becomes $400,000. The difference is $100,000. Spread over 100,000 units, this increases the target return price by $1 per unit.

The Unit Cost of a Product Is $10