Compu Services provides computerized inventory consulting. The office and comput

Question

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.
$Answer

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

(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 Answer %
Markup to cover desired profits Answer %

Explanation / Answer

a)Total variable cost = 30 * 20000 = $ 600000

Total cost = 600,000+625,000 = 1225000

Rate per hour = (Total cost +profit) /hours

                              = (1225000 + 100000) /20000

                            = 1325000/20000

                          = $ 66.25 per hour

b)Mark up on varible cost = Desired profit / Total variable cost

                              = 150,000 / 600,000

                              = .25 or 25%

c)Mark up to cover unassigned cost = unassigned cost /total variable cost

                                                             = 625000 / 600000

                                                             = 1.0417 or 104.17% (approx 104 %)

Mark up to cover desired profit = 60000 / 600,000

                                                   = .10 or 10%

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