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23 October, 06:22

Elkins, a manufacturer of ice makers, realizes a cost of $250 for every unit it produces. Its total fixed costs equal $5 million. If the company manufactures 500,000 units, compute the following: unit cost markup price if the company desires a 10% return on sales ROI price if the company desires a 25% return on an investment of $1 million

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  1. 23 October, 06:40
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    A) unit sales price 288.88

    B) unit sales price 260.5

    Explanation:

    B)

    return of 25% in a 1,000,000 investment: 250,000

    fixed cost per unit + variable cost + required return

    5,000,000/500,000 + 250 + 250,000/500,000 =

    10 + 250 + 0.5 = 260.5

    A)

    10% of sales as return:

    fixed cost + variable + 10% of sales = Sales

    10 + 250 + 0.1 S = S

    260 = 0.9S

    260/0.9 = S = 288,88
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