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MBI Inc.: Selling Price

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MBI, Inc., had sales of $141.6 million for fiscal 2010. The company's gross profit ratio for that year was 31.6%. The gross profit for fiscal 2010 was $44.7 million and the cost of goods sold was 96.9 million.

Assume that a new product is developed and that it will cost $1,860 to manufacture. Calculate the selling price that must be set for this new product if its gross profit ratio is to be the same as the average achieved for all products for fiscal 2010.

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Solution Summary

This solution illustrates how to compute a cost of goods sold percentage based upon a gross profit ratio and how to set a product's price so it yields that gross profit ratio.

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