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)some other amount.

Question

Quizplus · Accepted Answer

First, we need to calculate the target revenue by using the formula:

Target Revenue = Target Profit + Total Fixed Costs
Target Revenue = $60,000 + $168,000
Target Revenue = $228,000

Next, we need to calculate the target selling price per unit by using the formula:

Target Selling Price = (Total Variable Costs + Total Fixed Costs) / Total Units
Target Selling Price = ($450 + $168,000) / 480
Target Selling Price = $762.50

Finally, we can calculate the markup percentage on variable cost by using the formula:

Markup Percentage = (Target Selling Price - Variable Cost per Unit) / Variable Cost per Unit x 100%
Markup Percentage = ($762.50 - $450) / $450 x 100%
Markup Percentage = 68.56% (rounded to 2 decimal places)

Therefore, the markup percentage on variable cost would be 105.56% (100% + 68.56%). The best choice is B.

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