Pauley Company needs to determine a markup for a new product. Pauley expects to sell 15,000 units and wants a target profit of $22 per unit. Additional information is as follows: Using the variable cost method, what markup percentage to variable cost should be used?
A) 71%
B) 76%
C) 92%
D) 81%
E) 80%

Question

Pauley Company needs to determine a markup for a new product. Pauley expects to sell 15,000 units and wants a target profit of $22 per unit. Additional information is as follows:  Using the variable cost method, what markup percentage to variable cost should be used?
A) 71% 
B) 76% 
C) 92% 
D) 81% 
E) 80%

Quizplus · Accepted Answer

Markup % = [Target profit + Fixed overhead costs + Fixed administrative costs] / Total variable costs
[($22 × 15,000) + $13,500 + $21,000] / ($30 × 15,000) = 81%

Pauley Company Needs to Determine a Markup for a New