Question

Beta Company expects to incur overhead costs of $20,000 per month and direct production costs of $125 per unit. The estimated production activity for the upcoming year is 1,000 units. If the company desires to earn a gross profit of $50 per unit, the sales price per unit would be which of the following amounts

A) $379
B) $187
C) $136
D) $195

Answer 1

$415

Step-by-step explanation:

For computing the sales per unit first we have to determine the total sales value which is shown below:

Direct Production costs (1,000 units × $125) $125,000

Fixed Overhead costs for the year = $20,000 × 12 months = $240,000

Total Costs for the year $365,000

Gross Profit desired (1,000 units × $50) $50,000

Total Sales Value desired = Costs + Profit $415,000

Now

Sales price per unit is

= $415,000 ÷ 1,000 units

= $415

This is the answer but the same is not provided