Barber Company has budgeted sales of $30,000 with the following budgeted costs:
$$\begin{array} { l l }
\text { Direct materials } & \$ 6,300 \
\text { Direct labor } & \$ 4,100 \
\text { Variable factory overhead } & \$ 3,700 \
\text { Fixed factory overhead } & \$ 5,600 \
\text { Variable selling and administrative costs } & \$ 2,400 \
\text { Fixed selling and administrative costs } & \$ 3,200
\end{array}$$
What is the average target markup percentage for setting prices as a percentage of total variable costs?
A) 45%
B) 57%
C) 82%
D) none of the above

Question

Barber Company has budgeted sales of $30,000 with the following budgeted costs:
$$\begin{array} { l l } 
\text { Direct materials } & \$ 6,300 \
\text { Direct labor } & \$ 4,100 \
\text { Variable factory overhead } & \$ 3,700 \
\text { Fixed factory overhead } & \$ 5,600 \
\text { Variable selling and administrative costs } & \$ 2,400 \
\text { Fixed selling and administrative costs } & \$ 3,200
\end{array}$$
What is the average target markup percentage for setting prices as a percentage of total variable costs?
A) 45%
B) 57%
C) 82%
D) none of the above

Quizplus · Accepted Answer

The total variable costs are $6,300 (Direct materials) + $4,100 (Direct labor) + $3,700 (Variable factory overhead) + $2,400 (Variable selling and administrative costs) = $16,500. The markup is calculated as ($30,000 - $16,500) / $16,500 = 0.8181 or 81.81%, which rounds to 82%.

Barber Company Has Budgeted Sales of $30,000 with the Following