ATCE 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?
The answer is 20.99, not 31.29
19.54
31.29
20.99
44.50
if the price is p, you want
1250000p = 780000 + 1250000*19.85 + 650000
31.29
To determine the selling price per unit that ATCE should try in order to achieve a possible net profit of $650,000, we can use the following formula:
Selling Price Per Unit = (Fixed Costs + Target Profit) / Estimated Unit Sales + Variable Cost Per Unit
First, let's calculate the total variable costs:
Total Variable Costs = Estimated Unit Sales * Variable Cost Per Unit
Total Variable Costs = 1,250,000 * $19.85
Total Variable Costs = $24,812,500
Next, we can calculate the selling price per unit:
Selling Price Per Unit = ($780,000 + $650,000) / 1,250,000 + $19.85
Selling Price Per Unit = $1,430,000 / 1,250,000 + $19.85
Selling Price Per Unit = $2,080,000 / 1,250,000
Selling Price Per Unit = $1.664 per unit
Therefore, ATCE should try a selling price per unit of $1.664 in order to achieve a possible net profit of $650,000.
Please note that this calculation assumes that the estimated unit sales will be fulfilled and that there are no other costs or factors influencing the pricing decision.