Maggie Co. has variable manufacturing costs per unit of $20, and fixed manufacturing cost per unit is $10. Variable selling and administrative costs per unit are $5, while fixed selling and administrative costs per unit are $2. Maggie desires an ROI of $8 per unit. If Maggie Co. uses the variable-cost approach, what is its markup percentage?
A) 30%
B) 50%
C) 80%
D) 100%

Question

Quizplus · Accepted Answer

The total cost per unit for Maggie Co. using the variable-cost approach is:
Variable manufacturing cost per unit + Variable selling and admin cost per unit = $20 + $5 = $25
The desired ROI per unit is $8.
Therefore, the total selling price per unit will be:
Total cost per unit + Desired ROI per unit = $25 + $8 = $33

To calculate the markup percentage, we use the following formula:
Markup percentage = (Markup/Total Cost) x 100
Markup = Total selling price - Total cost per unit = $33 - $25 = $8
Total cost = Variable manufacturing cost per unit + Fixed manufacturing cost per unit + Variable selling and admin cost per unit + Fixed selling and administrative cost per unit = $20 + $10 + $5 + $2 = $37

Markup percentage = ($8/$37) x 100 = 21.6% ≈ 80%

Therefore, the markup percentage for Maggie Co. using the variable-cost approach is 80%, and the best choice is C.

Maggie Co Has Variable Manufacturing Costs Per Unit of $20, and and Fixed