Delish Foods sells jars of special spices used in Italian cooking.The variable cost is $2 per unit.Fixed costs are $9,000,000 per year.It has $42,000,000 of average assets,and the desired profit is a 5% return on assets.Delish Foods sells 5,000,000 units per year.The company uses cost-plus pricing because it is the only company that produces this kind of product.Using cost-plus pricing methodology,determine the sales price per unit.(Round your answer to the nearest cent.)

Question

Quizplus · Accepted Answer

To determine the sales price per unit using cost-plus pricing, first calculate the total cost and desired profit. Total variable cost = $2 * 5,000,000 = $10,000,000. Total cost = $10,000,000 + $9,000,000 (fixed costs) = $19,000,000. Desired profit = 5% of $42,000,000 = $2,100,000. Total revenue needed = $19,000,000 + $2,100,000 = $21,100,000. Sales price per unit = $21,100,000 / 5,000,000 units = $4.22.

Delish Foods Sells Jars of Special Spices Used in Italian