Question

During the coming year, Colgate expects an increase in variable manufacturing costs of $8 per unit and in fixed manufacturing costs of $35,000. (a) If sales for 2015 remain at 13,000 units, what price should Colgate charge to obtain the same profit as last year? Round to the nearest cent.

Answer 1

Answer: $130.69

Explanation:

Colgate made a Net Income of $167,000 in 2014 and sold 13,000 units.

Variable costs were $663,000 and fixed costs were $730,000.

Variable costs are to increase by $8 per unit and fixed costs by $35,000.

Price to sell at to maintain same profit as last year will be x

167,000 = 13,000x - (Old + New Variable cost) - ( Old + New Fixed Cost)

167,000 = 13,000x - (663,000 + (8* 13,000)) - ( 730,000 + 35,000)

167,000 = 13,000x - 767,000 - 765,000

167,000 = 13,000x - 1,532,000

13,000x = 1,699,000

x = 1,699,000/13,000

x = $130.69