Answer:
b. $170
Step-by-step explanation:
The computation of target selling price per pair of shoes is shown below:-
Return on investment = $1,700,000 × 30%
= $510,000
Total variable cost = Variable manufacturing costs + Variable selling and administrative costs
= $40,000 + $20,000
= $60,000
Variable cost per unit = Total variable cost ÷ Planned production and sales
= $60,000 ÷ 5,000
= $12
Total Fixed cost = Fixed manufacturing costs + Fixed selling and administrative costs
= $160,000 + $120,000
= $280,000
Target profit = Total Contribution - Fixed cost
Total Contribution = Return on investment + Total Fixed cost
= $510,000 + $280,000
= $790,000
Contribution per unit = Total Contribution ÷Planned production and sales
= $790,000 ÷ 5000
= $158
So, Selling price per unit = Contribution per unit + Variable cost per unit
= $158 + $12
= $170
Therefore for computing the the selling price per unit we simply applied the above formula.