What is the basic equation to determine the target selling price in cost-plus pricing?
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The most elementary pricing method is to add a standard markup to the product's cost. For example, construction companies give job bids by giving an estimate of the cost and adding a markup for profits. Suppose a printer manufacturer has the following costs and sales expectations: Variable cost per unit: $15 Fixed cost: $300,000 Expected unit sales: 30,000 (1) Unit cost ______? Unit cost = variable cost per unit + (fixed cost / unit sales) (2) Markup price? __________ If the printer manufacturer wants to earn a 50 percent markup on sales, its markup price? Markup price = Unit cost / (1 - markup) The manufacturer will charge dealers (3) $______ per printer and make a profit of (4) $______ per unit. (5) Target return price? $______ In target return price, the firm determines the price that would yield its target rate of return on investment. Suppose a printer manufacturer invested three million dollars and wants to earn a 50% ROI: Target return price = unit cost + desired earnings / unit sales Desired earnings = desired return x invested capital
Akash M.
A company manufactures a single product. Budget and Standard cost details for next year include: Selling Price per unit: R24.00 Variable Production cost per unit: R8.60 Fixed production costs: R650,000 Fixed selling and distribution costs: R230,400 Sales commission: 5% of the selling price Sales: 90,000 units Required: The marketing manager has suggested that the selling price per unit can be increased to R25.00. If the sales commission is increased to 8% of the selling price and a further R10,000 is spent on advertising, calculate the revised breakeven point based on the marketing manager's suggestion.
If the manufacturer of Exercise 4 wishes to guarantee profits of at least $600$ what should he set the selling price to be?
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