rxercise 13.19 Designs by Breanne is a graphic design studio specializing in log

Question

rxercise 13.19 Designs by Breanne is a graphic design studio specializing in logos and business stationery. Breanne made a $66,600 investment in her company and desires a 13% return. Annually, she designs and prints 3,200 orders. Her costs include Varlable Fixed Design costs s 19 per order 51,400 per year Production costs s 129 per order 40,960 per yea Marketing costs S 2,464 per year shipping costs 11 per order Determine the mark-up percentage using (Round all entries to 2 decimal places, e.g. 15.25%.) Mark up percentage 1. Absorption cost-based pricing 2. Variable cost based pricing 3. Total cost based pricing

Explanation / Answer

Desired return = 66000*13% = $       8,580.00 Cost of production & sale for 3200 orders: Total cost Unit cost Variable cost of production: Design costs = 3200*49 = 156800 49.00 Production costs = 3200*129 = 412800 129.00 Variable cost of production 569600 178.00 Fixed cost of production: Design 54400 17.00 Production 40960 12.80 Fixed cost of production 95360 29.80 Absorption cost of production 664960 207.80 Marketing cost 2464 0.77 Shipping costs 3189 1.00 Total cost 670613 209.57 MARKUP PERCENTAGE: 1) Absorption cost-based pricing = (8580+2464+3189+664960)/664960 -1 = 2.14% 2) Variable cost based pricing = (8580+2464+3189+664960)/569600 -1 = 19.24% 3) Total cost based pricing = (8580+2464+3189+664960)/670613 -1 = 1.28%

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