To be profitable, a firm has recover its costs. These costs include both its fixed

and its variable costs. One way that a firm evaluates at what stage it would

recover the invested costs is to calculate how many units or how much in dollar

sales is necessary for the firm to earn a profit.

Consider the case of Blue Mouse Manufacturers: Blue Mouse Manufacturers is

considering a project that will have fixed costs of $$15,000,000.$ The product will

be sold for $$41\mathrm{.}50$ per unit, and will incur a variable cost of $$12\mathrm{.}80$ per unit.

Blue Mouse Manufacturers' marketing sales director doesn't think that the

market for the firm's goods is big enough to sell enough units to make the

company's target operating profit of $$15,000,000.$ In fact, she believes that the

firm will be able to sell only about $200,000$ units. However, she also thinks the

demand for Blue Mouse Manufacturers's product is relatively inelastic, so the

firm can increase the sale price. Assuming that the firm can sell $200,000$ units,

what price must it set to meet the CFO's EBIT goal of $$15,000,000?$

a$.$ $$203\mathrm{.}50$

b$.$ $$187\mathrm{.}22$

C$.$ $$162\mathrm{.}80$

d$.$ $$170\mathrm{.}94$