Thornton Enterprises produces a product with fixed costs of $18,100 and variable cost of $4.10 per...
Thornton Enterprises produces a product with fixed costs of $18,100 and variable cost of $4.10 per unit. The company desires to earn a $27,000 profit and believes it can sell 11,000 units of the product.
Required
a. Based on this information, determine the target sales price. (Round your answer to 2 decimal places.)
Homework Answers
Answer: Target sales price is $8.2 per unit
Explanation:
Contribution required per unit = (Total fixed cost + Desired profit) / Number of units
= ($18,100 + $27,000) / 11,000 units
= $4.10
We know,
Contribution per unit = Selling price - Variable cost
Therefore,
Selling price = Contribution per unit + Variable cost
= $ 4.10 + $4.10
= $8.2 per unit
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