Blue Lights Co. uses the total cost concept of applying the cost-plus approach t

Question

Blue Lights Co. uses the total cost concept of applying the cost-plus approach to product pricing. The costs of producing and selling 7,700 units are as follows: Fixed factory overhead cost $60,000 Fixed selling and administrative costs 120,000 Variable direct materials cost per unit 80 Variable direct labor cost per unit 150 Variable factory overhead cost per unit 50 Variable selling and administrative cost per unit 30 If the amount of desired profit is $285,000, calculate the total cost markup percentage per unit. (Round answer to two decimal places) a. 11.10% b. 15.70% c. 9.30% d. 12.86%

Explanation / Answer

Answer:-Total cost markup percentage= (Desired profit/Total costs)*100

=($285000/$2567000)*100

=11.10%

Total cost= Variable costs+ Fixed costs

=$2387000+$180000

=$2567000

Variable costs = ($80+$150+$50+$30)*7700 units = $2387000

Fixed costs =$60000+$120000 = $180000

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