Using the variable cost concept, determine the selling price per unit for 30,000 units using the following data:Variable cost per unit $15Total fixed costs $90,000Desired profit $150,000Round to the nearest dollar.
A) $10
B) $15
C) $8
D) $23

Question

Using the variable cost concept, determine the selling price per unit for 30,000 units using the following data:​Variable cost per unit $15Total fixed costs $90,000Desired profit $150,000Round to the nearest dollar.
A) $10
B) $15
C) $8
D) $23

Quizplus · Accepted Answer

First, we need to calculate the total cost to produce 30,000 units:

Total Variable Cost = Variable Cost per Unit X Number of Units 
Total Variable Cost = $15 X 30,000 
Total Variable Cost = $450,000

Next, we can calculate the break-even point:

Break-even Point = (Total Fixed Costs + Desired Profit) ÷ Contribution Margin 
Contribution Margin = Selling price per unit - Variable cost per unit

We don't know the selling price per unit yet, so let's use "X" to represent it:

Break-even Point = ($90,000 + $150,000) ÷ (X - $15)

Simplifying:

Break-even Point = $240,000 ÷ (X - $15)

Now we can solve for X:

X - $15 = $240,000 ÷ 30,000 
X - $15 = $8 
X = $23

Therefore, the selling price per unit for 30,000 units is $23.

Using the Variable Cost Concept, Determine the Selling Price Per