Question

Linaweaver Inc. has $2.80 per unit in variable costs and $5.50 per unit in fixed costs and a production volume of 100,000 units per year. If Linaweaver marks up total cost by 0.50, what sale price in dollars should be charged if 42,000 units are expected to be sold each year

Answer 1

Answer:

 =  $8.80

Explanation:

Under the Mark-up pricing system, the price of a product is determined by adding a desired percentage of the the cost (called mark-up) to the full cost of the product.

Selling price = The full cost of the product  + mark -up

The full cost of a product = Variable cost + fixed cost

Remember that fixed cost do not varying within activity range

Selling price = ($2.80 + $ 5.50) + 0.50   = $8.8

Sales price to be charged =$8.8

Total sales value = $8.8× 42,000

                           =  $369,600.  (though this is not part of the requirement)