Titan Metalworks produces a special kind of metal ingots that are unique,which allows Titan to follow a cost-plus pricing strategy.Titan has $10,000,000 of assets and shareholders expect approximately a 8% return on assets.Assume all products produced are sold.Additional data are as follows: $$\begin{array} { | l | l | l | }
\hline \text { Sales volume } & 400,000 & \text { units per year } \
\hline \text { Variable costs } & \$ 15 & \text { per unit } \
\hline \text { Fixed costs } & \$ 1,600,000 & \text { per year } \
\hline
\end{array}$$ Using the cost-plus pricing approach,what should be the sales price per unit? (Round your answer to the nearest cent.)

Question

Titan Metalworks produces a special kind of metal ingots that are unique,which allows Titan to follow a cost-plus pricing strategy.Titan has $10,000,000 of assets and shareholders expect approximately a 8% return on assets.Assume all products produced are sold.Additional data are as follows: $$\begin{array} { | l | l | l | } 
\hline \text { Sales volume } & 400,000 & \text { units per year } \
\hline \text { Variable costs } & \$ 15 & \text { per unit } \
\hline \text { Fixed costs } & \$ 1,600,000 & \text { per year } \
\hline
\end{array}$$ Using the cost-plus pricing approach,what should be the sales price per unit? (Round your answer to the nearest cent.)

Quizplus · Accepted Answer

The expected return on assets is $10,000,000 * 8% = $800,000. Total costs include variable costs ($15 * 400,000 = $6,000,000) and fixed costs ($1,600,000), totaling $7,600,000. Adding the expected return to total costs gives $7,600,000 + $800,000 = $8,400,000. Dividing by the sales volume (400,000 units) gives a price per unit of $21.00.

Titan Metalworks Produces a Special Kind of Metal Ingots That