Gabriel Metalworks produces a special kind of metal ingots that are unique, which allows Gabriel to follow a cost-plus pricing strategy
Gabriel has $11,000,000 of assets and shareholders expect approximately a 9% return on assets. Assume all products produced are sold. Additional data are as follows:
Sales volume 450,000 units per year
Variable costs $16 per unit
Fixed costs $1,500,000 per year
Using the cost-plus pricing approach, what should be the sales price per unit? (Round your answer to the nearest cent.)
A) $16.00
B) $19.33
C) $21.53
D) $2.20
C .C)
Current variable costs (450,000 x $16 ) $7,200,000
Plus: Fixed cost 1,500,000
Full product cost $8,700,000
Plus: Desired profit ($11,000,000 x 9%) $990,000
Target revenue $9,690,000
Sales volume 450,000
Sales price per unit $21.53
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