Gabriel Metalworks produces a special kind of metal ingots that are unique,which allows Gabriel to follow a cost-plus pricing strategy.Gabriel has $11,000,000 of assets and shareholders expect approximately a 9% return on assets.Assume all products produced are sold.Additional data are as follows: $$\begin{array} { | l | r | l | }
\hline \text { Sales volume } & 450,000 & \text { units per year } \
\hline \text { Variable costs } & \$ 16 & \text { per unit } \
\hline \text { Fixed costs } & \$ 1,500,000 & \text { per year } \
\hline
\end{array}$$ Using the cost-plus pricing approach,what should be the sales price per unit? (Round your answer to the nearest cent. )

Question

Gabriel Metalworks produces a special kind of metal ingots that are unique,which allows Gabriel to follow a cost-plus pricing strategy.Gabriel has $11,000,000 of assets and shareholders expect approximately a 9% return on assets.Assume all products produced are sold.Additional data are as follows: $$\begin{array} { | l | r | l | } 
\hline \text { Sales volume } & 450,000 & \text { units per year } \
\hline \text { Variable costs } & \$ 16 & \text { per unit } \
\hline \text { Fixed costs } & \$ 1,500,000 & \text { per year } \
\hline
\end{array}$$ Using the cost-plus pricing approach,what should be the sales price per unit? (Round your answer to the nearest cent. )

Quizplus · Accepted Answer

To find the sales price per unit using cost-plus pricing, first calculate the required return: $11,000,000 * 9% = $990,000. Total costs = Variable costs (450,000 * $16) + Fixed costs ($1,500,000) = $9,700,000. Add the required return to total costs: $9,700,000 + $990,000 = $10,690,000. Divide by sales volume: $10,690,000 / 450,000 = $21.53 per unit.

Gabriel Metalworks Produces a Special Kind of Metal Ingots That