X Company makes and sells a single product In 2014 it sold 2

X Company makes and sells a single product. In 2014, it sold 25,500 units and profits were $190,000. In 2015, the company expects to sell 27,500 units, variable costs per unit are expected to be $27.40, and total fixed costs are expected to be $180,000.

What must the selling price be in 2015 for X Company profits to be the same as they were in 2014?

Solution

profit in 2014 for each unit - 190,000/25500 = $7.45

in 2015 company sell 27500 unit

variable cost per unit = 27.40

fixed cost $180,000

total cost $180,000+ 27500*$27.40 =933500

total cost + profit = total selling price

$933,500+27500*$7.45 =1,138,375

so selling price for each unit in 2015 is 1,138,375/27500 = $ 41.40