Davis Company has $20 per unit in variable costs and $800,000 per year in fixed costs.Demand is estimated to be 400,000 units per year.What is the desired price per unit if a markup of 30% on total cost is used to determine the price?

Question

Quizplus · Accepted Answer

First, we need to calculate the total cost per unit:
Total cost = Variable cost + (Fixed cost / units produced)
Total cost = $20 + ($800,000 / 400,000)
Total cost = $22 per unit

Then, we can calculate the price per unit using the desired markup:
Price = Total cost x (1 + Markup percentage)
Price = $22 x (1 + 0.30)
Price = $28.60 per unit

Therefore, the best choice is C.

Davis Company Has $20 Per Unit in Variable Costs and $800,000