Off Road Concepts, Inc produces a special kind of light-weight, recreational vehicle that has a unique design

It allows the company to follow a cost-plus pricing strategy. It has $9,000,000 of average assets, and the desired profit is a 7% return on assets. Assume all products produced are sold. Additional data are as follows:

Sales volume 2,000 units per year
Variable costs $1,000 per unit
Fixed costs $3,500,000 per year

Using the cost-plus pricing approach, what should be the sales price per unit?
A) $3,065
B) $8,000
C) $1,070
D) $1,000

A .A)
Current variable cost (2,000 x 1,000 ) $2,000,000
Plus: Fixed cost 3,500,000
Full product cost $5,500,000
Plus: Desired profit ($9,000,000 x 7%) $630,000
Target revenue $6,130,000
Divided by number of units / 2,000
Sales price per unit $3,065