The Falling Snow Company is considering production of a lighted world globe that

Question

The Falling Snow Company is considering production of a lighted world globe that the company would price at a markup of 0.30 above full cost. Management estimates that the variable cost of the globe will be $68 per unit and fixed costs per year will be $240,000.Assuming sales of 1,200 units, what is the full cost of a globe with a 0.30 markup?

The Falling Snow Company is considering production of a lighted world globe that the company would price at a markup of 0.25 above full cost. Management estimates that the variable cost of the globe will be $66 per unit and fixed costs per year will be $240,000.

Assume that the quantity demanded at the price calculated in part a is only 600 units. What is the full cost of the globe with a 0.25 markup?

Explanation / Answer

1> Variable Cost 62 Fixed cost/unit=240000/1200 200 Total Cost(A) 262 Mark up=0.25*262(B) 65.5 Full Cost of a globe=A+B 327.5 2> Variable Cost 60 Fixed cost/unit=240000/600 400 Total Cost(A) 460 Mark up=0.25*460(B) 115 Full Cost of a globe=A+B 575

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