If pauley company needs to determine a markup for a new product. The markup percentage to variable cost should be used is: 137%
Calculation for Total variable costs
Variable product cost per unit $16
Variable administrative cost per unit $17
Total variable costs =$33
Using this formula to find the markup percentage to variable cost
Markup percentage=[(Target profit + Fixed overhead costs + Fixed administrative costs) / Total variable costs
Let plug in the formula
Markup percentage=[($38× 15,000 units)+$50,950 +$57,950]/$33×15,000)
Markup percentage=($570,000+$50,950 +$57,950)/$495,000
Markup percentage=$678,900/$495,000
Markup percentage=137%
Therefore the markup percentage to variable cost that should be used will be 127%
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