Dixie industries has recently patented a new product called stardust. The follow

Question

Dixie industries has recently patented a new product called stardust.  The following annual information was developed by the companys controller for use in price determination:

Variable production cost: $930,000

Fixed Overhead:$310,000

Selling Expenses: $210,000

General and administrative expenses: $115,000

Desired profit: $171,000

Annual demand for the product is expected to be 500,000 bottles.  Round answers to the nearest two decimal places.

a) Compute the projected unit cost for one bottle of Stardust.

b) Prepare the formulas for computing the markup percentage and the selling price for one bottle using the gross margin pricing method.

Explanation / Answer

a) projected unit cost for one bottle of Stardust= (930000+310000+210000+115000)/ 500,000 =$3.13

b) in cost accounting, is a pricing method when a markup percentage is based on the product's total production costs.

Mark-up Percent = (Selling Price - Total Cost)

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