Pinkin Inc. needs to determine a price for a new phone model. Pinkin desires a 25% markup on the total cost of the phone. Pinkin expects to sell 30,000 phones. Additional information is as follows: Using the total cost method what price should Pinkin charge?
A) $156.10
B) $162.50
C) $130.10
D) $142.50
E) $161.25

Question

Pinkin Inc. needs to determine a price for a new phone model. Pinkin desires a 25% markup on the total cost of the phone. Pinkin expects to sell 30,000 phones. Additional information is as follows:  Using the total cost method what price should Pinkin charge?
A) $156.10 
B) $162.50 
C) $130.10 
D) $142.50 
E) $161.25

Quizplus · Accepted Answer

Total costs = Product costs + Administrative costs
($75 × 30,000) + $85,000 + ($50 × 30,000) + 65,000 = $3,900,000
Total cost per unit = Total costs/Total units expected to be sold
$3,900,000 / 30,000 = $130.00
Mark-up per unit = Total cost per unit × Markup percentage
$130.00 × 25% = $32.50
Selling price per unit = Total cost per unit + Markup per unit
$130.00 + $32.50 = $162.50