Problem 8-7 (Part Level Submission) The product design team of Canarie Golf is i
ID: 2557257 • Letter: P
Question
Problem 8-7 (Part Level Submission)
The product design team of Canarie Golf is in the process of designing a new model of golf bag cart. The company estimates that variable costs will be $34 per unit and fixed costs will be $858,500 per year.
Suppose the company wants to set its price equal to full cost plus 35 percent. To determine cost, the company must estimate the number of units it will produce and sell in a year. Suppose the company estimates that it can sell 8,500 units. What price will the company set? (Round answers to 2 decimal places, e.g. 125.25.)
Price $?
Explanation / Answer
$ 182.25
Working:
Units Per Unit Total Variable cost a 8,500 $ 34 $ 2,89,000 Fixed costs b $ 8,58,500 Total costs c=a+b $ 11,47,500 Markup d=c*35% $ 4,01,625 Selling price e=c+d $ 15,49,125 Total Units sold f 8,500 Sales Price per unit e/f $ 182.25