Question

Using the variable cost concept, determine the markup per unit for 30,000 units using the following data: Variable cost per unit $15 Total fixed costs $90,000 Desired profit $150,000 Round to the nearest dollar

Answer 1

Answer:

$5 / unit

Explanation:

Variable cost (VC) per unit = $15

Units = 30,000

Total VC = 30,000 x 15 = $450,000

Fixed Costs (FC) = $90,000

Desired Profit = $150,000

Sales Revenue = Total VC + FC + Desired profit

                         = $450,000 + $90,000 +$150,000

                         = $690,000

Selling price per unit = $690,000 / 30,000 units = $23 / unit

Cost per unit = ( $450,000 + $90,000) / 30,000 = $18 / unit

Mark-up = (Selling price per unit - Cost per unit) / Cost per unit

              =  (23 - 18) / 18

              = 27.78 %

The Mark-up is 27.78%

Desired profit divided by units is the mark-up in dollars

150,000/30000 = $5 per unit