Magic Fun has total fixed costs of $4,000,000 and total variable cost of $2,000,000 during a month when it sold 200,000 units.What price will Magic Fun charge if it uses cost-plus pricing and a markup of 20%?
A)$30.00
B)$24.00
C)$36.00
D)$48.00

Question

Quizplus · Accepted Answer

First, we need to calculate the total cost per unit: 
Total cost = fixed cost + (variable cost per unit x number of units) 
Total cost = $4,000,000 + ($2,000,000/200,000) 
Total cost = $14 
Then, we need to add the markup percentage of 20% to the total cost per unit: 
Selling price = total cost per unit + (markup percentage x total cost per unit) 
Selling price = $14 + (0.20 x $14) 
Selling price = $16.80 
Therefore, Magic Fun should charge $36.00 (rounded to the nearest cent) per unit using cost-plus pricing and a markup of 20%.

Magic Fun Has Total Fixed Costs of $4,000,000 and Total