Question
The Flounder Company has recently established operations in a competitive market. Management has been aggressive in its attempt to establish market share. The price of
The Flounder Company has recently established operations in a competitive market. Management has been aggressive in its attempt to establish market share. The price of the product was set at $5.20 per unit, well below that of the companys major competitors. Variable costs were $4.70 per unit, and total fixed costs were $647,200 during the first year.
Assume that the firm was able to sell 1,094,000 units in the first year. What was the pretax earning (loss) for the year? (Show a loss preceded by a minus sign, e.g. -15,000 or (15,000).) Pretax earning (loss) $ ______
Assume that the variable cost per unit and total fixed costs do not increase in the second year. Management has been successful in establishing its position in the market. What price must be set to achieve pretax earnings of $27,260? Assume that sales remain at 1,094,000 units. (Round to 2 decimal places, e.g. 15.25.)
Price $________
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