Reference no: EM132942552

Indiana Co. has developed a new type of fedora which it hopes to sell beginning this year. Henry Jones, the Managing Director of Indiana Co. didn't pay attention in his managerial accounting class and has hired you to help him calculate his selling price. Jones thinks he can sell 100,000 hats due to his fame as a consulting archaeologist, but only has funding to lease manufacturing facilities which can produce up to 80,000 hats. The owner of the manufacturing facilities wants an annual fixed fee of $500,000 plus a 10% share of Indiana's pre-tax operating profits (revenues minus all variable and fixed costs before factoring in the profit-sharing percentage and taxes) in exchange for using the facilities.

Per-unit variable costs are presented below. Indiana Co. is subject to a 20% income tax rate on accounting pre-tax income.

Direct materials $12.00
Direct labor 27.50
Manufacturing overhead 5.00
Total variable manufacturing costs 44.50

Selling expenses 7.25
Total variable costs 51.75

Problem 1: Jones would like to earn a post-tax, post-profit-sharing income of $115,200 this year to supplement his income from his archaeological endeavors and teaching post. What is the minimum selling price per unit to achieve his target income?