Calculating Selling Price for Target Profit

Steps:

• Total variable costs = $20 × 5000 units =$100,000
• Total costs = $100,000 +$40,000 fixed = $140,000
• Required revenue = $140,000 +$60,000 profit = $200,000
• Selling price per unit = $200,000 ÷ 5000 units =$40

Why D is correct:

• D is incorrect; $80 per unit uses the formula Revenue = (Variable Cost per Unit × Units) + Fixed Costs + Profit, but yields$260,000 profit, exceeding the target by $200,000.

Why the others are wrong:

• A. $64 yields$180,000 profit (excess of $120,000)
• B. $68 yields$200,000 profit (excess of $140,000)
• C. $72 yields$220,000 profit (excess of $160,000)

Final answer: None of the options; $40