MA99 Problem: Pricing

MA99 Problem: Pricing

- Classic Corporation

 The following data relate to a year's budgeted activity (100,000 units) for Classic Corporation, a single- product company:

 Per Unit 

Selling price 5.00Variable manufacturing costs 1.00Variable marketing costs 2.00Fixed manufacturing costs (based on 100,000 units) 0.25Fixed marketing costs (based on 100,000 units) 0.65

Total fixed costs remain unchanged between 25,000 units and total capacity of 160,000 units. An order isreceived for 10,000 units to be used in an unrelated market. The sale would require production of 10,000extra units.

 Required -

What price per unit should be charged on the special order to increase operating profit by $15,000?