Question

Jones Company uses cost-plus pricing. Assume the company expects to sell 400 chairs. Average assets are $150,000. Variable costs are $70 per unit and total fixed costs are $9,000. The desired profit is 30% of average assets. What is the cost-plus selling price per chair?

Answer 1

Answer:

Selling price per unit = $205

Explanation:

Provided that,

Desired profit = 30% of average assets

= $150,000 $\times$ 30% = $45,000

Total units of chairs to be sold = 400

Variable cost total = 400 $\times$ $70 = $28,000

Total Fixed cost = $9,000

Add: Desired Profit = $45,000

Total sales value shall be = $28,000 + $9,000 + $45,000 = $82,000

Thus selling price per unit = $82,000/400 = $205 per unit.