The McDermott Company estimates its average total cost to be $10 per unit

of output when it produces 10,000 units, which it regards as 80% of capacity.

Its goal is to earn 20% on its total investment, which is $250,000.

a. If the company uses cost- plus pricing, what price should it set?

b. Can it be sure of selling 10,000 units if it sets this price?

c. What are the arguments for and against a pricing policy of this sort?