Gabriel metalworks produces a special kind of metal ingots that are unique, which allows gabriel to follow a cost−plus pricing strategy. gabriel has $10,000,000 of assets and shareholders expect approximately a 7% return on assets. assume all products produced are sold. additional data are as follows: sales volume350,000units per yearvariable costs$16per unitfixed costs$1,500,000per yearusing the cost−plus pricing approach, what should be the sales price per unit? (round your answer to the nearest cent.)

sale price is $0.78

Explanation:

Given data

assets = $10,000,000

rate = 7% = 0.07

Sales volume = 350,000 units per year

Variable costs = $16 per unit

Fixed costs = $1,500,000 per year

to find out

sales price per unit

solution

we find required return that i s

return = asset × rate

return = 10,000,000  × 0.07

return = $700000

so here total cost = Sales volume  ×  Variable costs + fixed cost

put here all these value

total cost = 350000 × 16  + 1,500,000

total cost = $7100000

so now for sale price

sale price = total cost + required return / sale

put all these value

sale price = ( 7100000 + 700000 ) / 10,000,000

sale price is $0.78

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