The Radek company uses cost-plus pricing with a 30% mark-up. The compa

QUESTION

The Radek company uses cost-plus pricing with a 30% mark-up. The company is currently selling 80,000 units at $65 per unit. Each unit has a variable cost of $47. In addition, the company incurs $240,000 in fixed costs annually. If demand falls to 40,000 units and the company wants to continue to cha
Costs for the new demand of 40,000 units: Variable costs = 40,000 x $47 = $1,880,000 Fixed costs = $240,000 Total costs = fixed variable = 1,880,000 240,000 = 2,120,000 Total cost/unit = 2,120,000/40,000 = $53/unit If the continue to sell at

5, the profit margin percent, is net income per dollar of sales. The absolute dollar income is $65 $53 = $12 per unit So profit margin is $12/$65 = 18.46% approx

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