Delish Foods sells jars of special spices used in Italian cooking.The variable cost is $2 per unit.Fixed costs are $10,000,000 per year.It has $42,000,000 of average assets,and the desired profit is a 5% return on assets.Delish Foods sells 5,000,000 units per year.The company uses cost-plus pricing because it is the only company that produces this kind of product.Using cost-plus pricing methodology,determine the sales price per unit.(Round your answer to the nearest cent.)

Question

Quizplus · Accepted Answer

First, calculate the desired profit: 5% of $42,000,000 = $2,100,000. Total costs include variable costs ($2 per unit * 5,000,000 units = $10,000,000) and fixed costs ($10,000,000), totaling $20,000,000. Adding the desired profit ($2,100,000) to the total costs ($20,000,000) gives $22,100,000. Dividing this by the number of units (5,000,000) gives a price per unit of $4.42.

Delish Foods Sells Jars of Special Spices Used in Italian