A company uses cost-plus pricing and has a total cost of $40.00 per unit at a volume of 120,000 units.The variable cost per unit is $25.00.What will the price be if the company expects a volume of 110,000 units and uses a markup of 50%?
A)$41.36
B)$62.05
C)$37.50
D)$60.00

Question

Quizplus · Accepted Answer

First, calculate the cost per unit:
Fixed cost per unit = Total fixed cost / volume = $40.00 / 120,000 = $0.33
Variable cost per unit = $25.00
Total cost per unit = $0.33 + $25.00 = $25.33

Then, calculate the price using cost-plus pricing:
Markup = 50% of cost = 50% x $25.33 = $12.67
Price = Cost + Markup = $25.33 + $12.67 = $38.00

Finally, adjust the price based on the expected volume:
Price adjustment = (Actual volume - Expected volume) / Expected volume = (120,000 - 110,000) / 110,000 = 0.0909
Adjusted price = Price x (1 + Price adjustment) = $38.00 x (1 + 0.0909) = $41.36

Therefore, the best choice is B.

A Company Uses Cost-Plus Pricing and Has a Total Cost