The Marietta Company has fixed costs of $60,000 and variable costs are 75% of the selling price.To realize profits of $10,000 from sales of 50,000 units,the selling price per unit ________.
A) must be $1.20
B) must be $6.00
C) must be $5.60
D) must be $4.23

Question

Quizplus · Accepted Answer

First, we need to find the total cost (fixed + variable) for the Marietta Company:
Total cost = Fixed cost + Variable cost
Variable cost = 75% of selling price
Let's assume that the selling price per unit is S.
Variable cost per unit = 0.75S
Total cost per unit = Fixed cost per unit + Variable cost per unit
Total cost per unit = $60,000/50,000 + 0.75S
Total cost per unit = $1.20 + 0.75S

To realize profits of $10,000 from sales of 50,000 units, the total revenue should be:
Total revenue = Total cost + Profit
Total revenue = (50,000 x $1.20) + $10,000
Total revenue = $70,000

The selling price can be calculated by dividing the total revenue by the number of units sold:
Selling price per unit = Total revenue/Number of units sold
Selling price per unit = $70,000/50,000
Selling price per unit = $1.40

Therefore, the answer is C, as the selling price per unit must be $5.60 to realize profits of $10,000 from sales of 50,000 units.

The Marietta Company Has Fixed Costs of $60,000 and Variable