Saffron Foods sells jars of special spices used in Spanish cooking
The variable cost is $1 per unit. Fixed costs are $9,000,000 per year. It has $42,000,000 of average assets, and the desired profit is a 4% return on assets. Saffron Foods sells 5,000,000 units per year. The company uses cost-plus pricing because it is the only company that produces this kind of product. Using cost-plus pricing methodology, determine the sales price per unit. (Round your answer to the nearest cent.)
A) $1.25
B) $3.14
C) $2.80
D) $1.00
B .B)
Current variable cost (5,000,000 x 1 ) $5,000,000
Plus: Fixed cost 9,000,000
Full product cost $14,000,000
Plus: Desired profit (42,000,000 x 4%) $1,680,000
Target revenue $15,680,000
Divided by number of units / 5,000,000
Sales price per unit $3.14
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