Whey Company follows a cost-based approach to pricing. Prices are 150 percent of variable manufacturing costs. The annual cost of producing one of its products follows:
Variable Manufacturing Costs ...................................................................... $15 per Unit
Fixed Manufacturing Costs ................................................................... $50,000 per Year
Variable Selling and Administrative Costs .................................................... $2 per Unit
Fixed Selling and Administrative Costs .............................................. $75,000 per Year
a. Assume that Whey produces and sells 10,000 units. Calculate the selling price per unit.
b. Assume that Whey produces and sells 20,000 units. Calculate the selling price per unit.
c. Is Whey company profitable at either 10,000 or 20,000 units?