The Cairns Company has fixed costs of $400 000 and variable costs are 75% of the selling price.To realise profits of $100 000 from sales of 500 000 units,the selling price per unit:

Question

Quizplus · Accepted Answer

To calculate the selling price per unit, we need to use the following equation:

Total costs + Total Profits = Total Revenue

We know that the fixed costs are $400,000 and the variable costs are 75% of the selling price. Therefore, the variable cost per unit can be expressed as:

0.75S

Where S is the selling price per unit.

We also know that the company wants to realise profits of $100,000 from the sale of 500,000 units. This means that the profit per unit is:

$100,000 / 500,000 units = $0.20 per unit

Now, we can substitute all the values into the total costs equation:

$400,000 + ($0.20 + 0.75S) * 500,000 units = S * 500,000 units

Solving for S, we get:

S = $4.00 per unit

Therefore, the selling price per unit must be $4.00 to achieve a profit of $100,000 from sales of 500,000 units.

The Cairns Company Has Fixed Costs of $400 000 and Variable