Chegg, can you show me step by step how you arrive at the answers. Thank you. Co

Question

Chegg, can you show me step by step how you arrive at the answers. Thank you.

Cost-Based Pricing and Markups with Variable Costs

Compu Services provides computerized inventory consulting. The office and computer expenses are $625,000 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 $100,000, what should it charge per hour? Round to the nearest cent.
$

(b) What is the markup on variable costs if the desired profit is $150,000? Round to the nearest whole percent.
%

(c) If the desired profit is $60,000, what is the markup on variable costs to cover (1) unassigned costs and (2) desired profit? Round to the nearest whole percent.
Markup to cover unassigned costs %
Markup to cover desired profits %

Explanation / Answer

a If the company desires a profit of $100,000, what should it charge per hour? Particulars Amount Variable cost (20000 hours*$30 per hour) $600,000.00 Add: Fixed cost $625,000.00 Add: Desired profit $100,000.00 Required revenue from service $1,325,000.00 Devided by Number of hours 20000 Charge per hour (1325000/20000) $66.25 b What is the markup on variable costs if the desired profit is $150,000? Particulars Amount Variable cost (20000 hours*$30 per hour) $600,000.00 Add: Fixed cost $625,000.00 Add: Desired profit $150,000.00 Required revenue from service $1,375,000.00 Markup on varible cost = (Required profit+Fixed cost)/ Variable cost Markup on varible cost =(150000+625000)/600000 Markup on varible cost = 129.17% b What is the markup on variable costs if the desired profit is $60,000? Particulars Amount Variable cost (20000 hours*$30 per hour) $600,000.00 Add: Fixed cost $625,000.00 Add: Desired profit $60,000.00 Required revenue from service $1,285,000.00 Markup on varible cost = (Required profit+Fixed cost)/ Variable cost Markup on varible cost =(60000+625000)/600000 Markup on varible cost = 114.17%

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