The M Company's variable costs are 75% of the sales price per unit and their fixed costs are $240,000. If the company earned $60,000 before taxes in selling 150,000 units, what was the sales price per unit?
What will be an ideal response?
Variable cost per unit = 75% price per unit
Or, V = .75 P
Before-tax profit = Total contribution margin less Fixed costs
$60,000 = 150,000 × (P - V) - FC
$60,000 = 150,000 × (P - .75P) - $240,000
$300,000 = 150,000 × .25P
$300,000 = 37,500 P
P = $8.00
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