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5 November, 12:12

Tamara Tools, Inc. wishes to earn a 30% return on its $100,000 investment in equipment used to produce T-squares for carpenters. Based on estimated sales of 20,000 T-square tools next year, the costs per unit would be as follows:Variable cost$15.00Fixed selling and administrative costs2.00Fixed manufacturing cost3.00At how much per unit should T-squares be priced for sale? A. $21.50B. $20.00C. $16.50D. $15.00

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  1. 5 November, 12:19
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    A. $21.50

    Explanation:

    The computation of the per unit price is shown below:

    = (Total cost + expected profit) : (number of units sold)

    where,

    Total cost equal to

    = (Variable cost per unit + Fixed selling and administrative costs per unit + Fixed manufacturing cost per unit) * (number of units sold)

    = ($15 + $2 + $3) * 20,000

    = $400,000

    The expected profit would be

    = $100,000 * 30%

    = $30,000

    And, the number of units sold is 20,000

    Now put these values to the above formula

    So, the per unit would equal to

    = ($400,000 + $30,000) : (20,000)

    = $21.50
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