Question

Pauley Company needs to determine a markup for a new product. Pauley expects to sell 15,000 units and wants a target profit of $22 per unit. Additional information is as follows: Variable product cost per unit $ 19 Variable administrative cost per unit 11 Total fixed overhead 13,500 Total fixed administrative 21,000 Using the variable cost method, what markup percentage to variable cost should be used?Variable product cost per unit $ 19 Variable administrative cost per unit 11 Total fixed overhead 13,500 Total fixed administrative 21,000Using the variable cost method, what markup percentage to variable cost should be used?

Answer 1

The markup percentage for variable costs that should be used will be 81%.

The calculation for the markup percentage to variable cost that should be used is given below:

Using this formula,

Markup percentage=[(Target profit + Fixed overhead costs + Fixed administrative costs) / Total variable costs

Let's plug in the formula,

Markup percentage=[($22*15,000 units)+$13,500+$21,000]/$30×15,000)

Markup percentage=($330,000+$13,500+$21,000)/$450,000

Markup percentage=$364,500/$450,000

Markup percentage=0.81*100

Markup percentage=81%

The calculation for Total variable costs,

Variable product cost per unit $19

Variable administrative cost per unit $11

Total variable costs =$30

Therefore, the markup percentage to variable cost that should be used will be 81%.

To learn more about markup percentages, visit the link below:

brainly.com/question/29679075

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