Question 3 - Question 3.17 Profit price for target profit...

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Question 3.17
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Profit, price for target profit The Martell Company has recently established operations in a competitive market. Management has been aggressive in its attempt to establish a market share. The price of the product was set at $5.50 per unit, well below that of the company's major competitors. Variable costs were $4.95 per unit, and total fixed costs were $660,000 during the first year. (The numbers and symbols in parenthesis corresponds to the coding system in the textbook.) Required Assume that the firm was able to sell 1,000,000 units in the first year. What was the pretax profit (loss) for the year? (If the answer is a deficit, please put a minus sign in front of the amount, for example, -22,500.) Pretax profit (loss) $ -110,000
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Assume that the variable cost per unit and total fixed costs do not increase in the second year. Management has been successful in establishing its position in the market. What price must be set to achieve a pretax profit of $27,500? Assume that sales remain at 1,000,000 units. (Round answer to 3 decimal places.) [e]
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