Compu Services provides computerized inventory consulting. The office and comput

Question

Compu Services provides computerized inventory consulting. The office and computer expenses are $600,000 annually and are not assigned to specific jobs. The consulting hours available for the year total 20,000, and the average consulting hour has $30 of variable costs.

(a) If the company desires a profit of $80,000, what should it charge per hour?

(b) What is the markup on variable costs if the desired profit is $120,000?

(c) If the desired profit is $120,000, what is the markup on variable costs to cover (1) unassigned costs and (2) desired profit?
Markup to cover unassigned cost

Markup to cover desired profits

Explanation / Answer

(a) Let the charge per hour be x

(x-30) 20,000       = $600,000 +80,000

20,000x - 600,000 = $680,000

x                            = $64

(b) Mark up on variable cost to cover unassigned costs = 720,000/600,000 = 120%

(c) Markup to cover unassigned cost = 600,000/600,000 = 100%

Markup to cover desired profit            = 60,000/600,000   = 10%

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.