What is the lowest selling price per unit among those listed below that could be charged for the new product and still make it economically desirable to add the new product?

Question

Quizplus · Accepted Answer

To choose the lowest selling price per unit that could be charged for the product, we need to calculate the total cost per unit and add the desired profit margin to it. Given that the fixed cost of manufacturing and introducing the new product is $19,800 and the variable cost per unit is $166, we can calculate the total cost per unit as:
Total cost per unit = Fixed cost/Number of units + Variable cost per unit
Total cost per unit = $19,800/900 + $166
Total cost per unit = $22 + $166
Total cost per unit = $188
Now, if we want to have a profit margin of 25% on the selling price, we can calculate the minimum desirable selling price as:
Selling price = Total cost per unit/(1 - Desired profit margin)
Selling price = $188/(1 - 0.25)
Selling price = $188/0.75
Selling price = $250.67
Therefore, the lowest selling price per unit among the given options that would make the new product economically desirable is $249 (Option C).

What Is the Lowest Selling Price Per Unit Among Those