The Estrada Company uses cost-plus pricing with a 0.37 mark-up. The company is currently selling 100,000 units at $12 per unit. Each unit has a variable cost of $5.60. In addition, the company incurs $186,800 in fixed costs annually. If demand falls to 72,200 units and the company wants to continue to earn a 0.37 return, what price should the company charge? (SHOW WORK) Solution Statement showing computation of Price Particulars Desired Price No of units sold                           72,200.00 Variable Costs Per unit                                      5.60 Total Variable costs(No of units*VC per unit)                         404,320.00 Fixed Costs                         186,800.00 Total Costs(VC + FC)                         591,120.00 No of units sold                           72,200.00 Unit Cost                                      8.19 Mark Up @37%                                      3.03 Price company should charge(8.19+3.03)                                    11.22 .

1. The Estrada Company uses cost-plus pricing with a 0.37 mark-up. The company is currently
selling 100,000 units at $12 per unit. Each unit has a variable cost of $5.60. In addition, the
company incurs $186,800 in fixed costs annually. If demand falls to 72,200 units and the
company wants to continue to earn a 0.37 return, what price should the company charge?
(SHOW WORK)
Solution
Statement showing computation of Price Particulars Desired Price No of units sold
                         72,200.00 Variable Costs Per unit
                                    5.60
Total Variable costs(No of units*VC per unit)
                       404,320.00 Fixed Costs
                       186,800.00 Total Costs(VC + FC)
                       591,120.00 No of units sold
                         72,200.00 Unit Cost
                                    8.19
Mark Up @37%
                                    3.03
Price company should charge(8.19+3.03)
                                  11.22