Asked by Anaelle Gauthier on Jul 06, 2024
Verified
Sierra Company produces its product at a total cost of $89 per unit. Of this amount, $14 per unit is selling and administrative costs. The total variable cost is $58 per unit and the desired profit is $28 per unit.?Determine the markup percentage using the
(a) total cost,
(b) product cost, and
(c) variable cost concepts.
Markup Percentage
The percentage by which the cost of a product is increased to determine its selling price.
Variable Cost
Costs that vary directly with the level of production or sales volume, such as materials and labor.
Selling and Administrative Costs
Expenses related directly to the marketing and management of a company, excluding costs associated with the production or purchase of goods.
- Familiarize yourself with the cost-plus pricing mechanism, including how to figure out markup percentages.
- Execute the principle of variable cost for price determination and desired profit calculation.
- Apply the comprehensive cost concept in setting product prices and recognize how it differs from the variable cost approach.
Verified Answer
OE
Olivia EasonJul 11, 2024
Final Answer :
(a) Total Cost = $28/$89 = 31.5%?
(b) Product Cost = ($28 + $14)/$75 = 56%?
(c) Variable Cost = ($28 + $31)/$58 = 101.7%
(b) Product Cost = ($28 + $14)/$75 = 56%?
(c) Variable Cost = ($28 + $31)/$58 = 101.7%
Learning Objectives
- Familiarize yourself with the cost-plus pricing mechanism, including how to figure out markup percentages.
- Execute the principle of variable cost for price determination and desired profit calculation.
- Apply the comprehensive cost concept in setting product prices and recognize how it differs from the variable cost approach.