Nelson Products is a price-setter that uses the cost-plus pricing approach
The products are specialty vacuum tubes used in sound equipment. The CEO is certain that the company can produce and sell 310,000 units per year, due to the high demand for the product. Variable costs are $2.40 per unit. Total fixed costs are $960,000 per year. The CEO will receive stock options if $200,000 of operating income for the year is reported. What sales price would allow the CEO to achieve the target if the cost-plus pricing method is used? (Round your answer to the nearest cent.)
A) $2.40 per unit
B) $6.14 per unit
C) $3.74 per unit
D) $4.85 per unit
B .B)
Current variable cost (310,000 x 2.40 ) 744,000
Fixed costs 960,000
Stock options 200,000
Target revenue 1,904,000
Divided by number of units / 310,000
Sales price per unit 6.14
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