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Delphi Company has developed a new project that will be marketed for the first time during the next fiscal year. Although the Marketing Department estimates that 35,000 units could be sold at $36 per unit, Delphi's management has allocated only enough manufacturing capacity to produce a maximum of 25,000 units of the new product annually. The fixed costs associated with the new product are budgeted at $450,000 for the year, which includes $60,000 for depreciation on new manufacturing equipment. Data associated with each unit of product are presented as follows. Delphi is subject to a 40% income tax rate.
Delphi Company's management has stipulated that it will not approve the continued manufacture of the new product after the next fiscal year unless the after-tax profit is at least $75,000 the first year. The unit selling price to achieve this target profit must be at leastA. $36.60. B. $34.60. C. $39.00. D. $37.00. |