If the target profit is $60,000 for a volume of 480 units, fixed costs are $168,000, and the variable cost per unit is $450, then the markup percentage on variable cost would be:
A) 104.56%.
B) 105.56%.
C) 106.00%.
D) 106.45%.
E) None of the answers is correct.

Question

Quizplus · Accepted Answer

To find the markup percentage, first calculate the total cost and desired revenue. Total cost = Fixed costs + (Variable cost per unit * Volume) = $168,000 + ($450 * 480) = $384,000. Desired revenue = Total cost + Target profit = $384,000 + $60,000 = $444,000. Selling price per unit = $444,000 / 480 = $925. Markup on variable cost = (Selling price per unit - Variable cost per unit) / Variable cost per unit = ($925 - $450) / $450 = 1.0556 or 105.56%.

If the Target Profit Is $60,000 for a Volume of 480