Learning Center would like a possible net profit of $650,000 on its new resource manual it sells to schools. The fixed costs for producing the manual are $780,000 and the variable cost per package is $19.85. If the estimated unit sales are 1,250,000 units, what selling price per unit should ATCE try?
1250000p = 780000 + 19.85*125000 + 650000
p = $20.99
To determine the selling price per unit that the Learning Center should set, we need to calculate the total costs, including fixed costs and variable costs, and then add the desired profit to it. Here's how you can find the selling price per unit:
1. Calculate the total variable costs:
Variable Cost per Unit = $19.85
Estimated Unit Sales = 1,250,000 units
Total Variable Costs = Variable Cost per Unit * Estimated Unit Sales
2. Calculate the total costs:
Total Fixed Costs = $780,000
Total Costs = Total Fixed Costs + Total Variable Costs
3. Calculate the desired profit:
Desired Profit = $650,000
4. Calculate the total revenue:
Total Revenue = Total Costs + Desired Profit
5. Calculate the selling price per unit:
Selling Price per Unit = Total Revenue / Estimated Unit Sales
Let's plug in the values and do the calculations:
1. Total Variable Costs = $19.85 * 1,250,000
= $24,812,500
2. Total Costs = $780,000 + $24,812,500
= $25,592,500
3. Desired Profit = $650,000
4. Total Revenue = $25,592,500 + $650,000
= $26,242,500
5. Selling Price per Unit = $26,242,500 / 1,250,000
≈ $20.994
Therefore, the Learning Center should set a selling price of approximately $20.994 per unit for the resource manual.