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 8% return on assets.Assume all products produced are sold.Additional data are as follows: $$\begin{array} { | l | r | l | }
\hline \text { Sales volume } & 450,000 & \text { units per year } \
\hline \text { Variable costs } & \$ 15 & \text { per unit } \
\hline \text { Fixed costs } & \$ 1,700,000 & \text { per year } \
\hline
\end{array}$$ 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 8% return on assets.Assume all products produced are sold.Additional data are as follows: $$\begin{array} { | l | r | l | } 
\hline \text { Sales volume } & 450,000 & \text { units per year } \
\hline \text { Variable costs } & \$ 15 & \text { per unit } \
\hline \text { Fixed costs } & \$ 1,700,000 & \text { per year } \
\hline
\end{array}$$ Using the cost-plus pricing approach,what should be the sales price per unit? (Round your answer to the nearest cent.)

Quizplus · Accepted Answer

First, calculate the desired return: $11,000,000 * 8% = $880,000. Total costs include variable costs ($15 * 450,000 = $6,750,000) and fixed costs ($1,700,000), totaling $8,450,000. Adding the desired return, the total is $9,330,000. Dividing by the sales volume (450,000 units) gives a price per unit of $20.73.

Gabriel Metalworks Produces a Special Kind of Metal Ingots That