The estimated production and sales for a coffee table book on celebrity gardening is 50,000 volumes at a total cost of $750,000. Calculate the sales price for each book if the publisher desires a before-tax return of 25 percent.
A) $12.50
B) $15.00
C) $18.75
D) $30.00

Question

Quizplus · Accepted Answer

With the rate-of-return, or target pricing method, price is determined by adding a desired rate of return on investment to total costs. Generally, a break-even analysis is performed for expected production and sales levels and a rate of return is added on. Thus, the sales price can be calculated as [750,000 + (0.25 * 750,000)]/50,000.

The Estimated Production and Sales for a Coffee Table Book