Assume a manufacturer with fixed costs of $100 000,a variable cost of $10,and expected sales of 50 000 units wants to earn a 20 percent markup on sales.What is the manufacturer's markup price?
A) $14
B) $15
C) $18
D) $18.50
E) $150

Question

Assume a manufacturer with fixed costs of $100 000,a variable cost of $10,and expected sales of 50 000 units wants to earn a 20 percent markup on sales.What is the manufacturer's markup price?
A)	$14
B)	$15
C)	$18
D)	$18.50
E)	$150

Quizplus · Accepted Answer

The manufacturer's total cost is the sum of fixed costs and variable costs. Variable costs are $10 per unit for 50,000 units, which equals $500,000. Adding the fixed costs of $100,000, the total cost is $600,000. To achieve a 20% markup on sales, the total sales need to be $600,000 * 1.20 = $720,000. Dividing this by 50,000 units gives a price per unit of $14.40. However, since this exact value is not an option and the closest option is $15, option B is the correct choice.

Assume a Manufacturer with Fixed Costs of $100 000,a Variable