A company has $8.00 per unit in variable costs and $4.00 per unit in fixed costs at a volume of 50,000 units.If the company marks up total cost by 60%, what price should be charged if 60,000 units are expected to be sold?
A)$7.20
B)$18.13
C)$19.20
D)$11.33

Question

Quizplus · Accepted Answer

First, calculate the total cost for 50,000 units: Variable costs = $8.00 * 50,000 = $400,000. Fixed costs = $4.00 * 50,000 = $200,000. Total cost = $400,000 + $200,000 = $600,000. When 60,000 units are expected to be sold, fixed costs per unit decrease because they are spread over more units. New fixed cost per unit = $200,000 / 60,000 = $3.33. Total cost per unit at 60,000 units = $8.00 (variable cost) + $3.33 (new fixed cost) = $11.33. Marking up the total cost by 60%: $11.33 * 1.60 = $18.13.

A Company Has $8