Hordel Company needs to determine a markup for a new product. Hordel expects to sell 5,000 units and wants a target profit of $82 per unit. Additional information is as follows: Using the variable cost method, what markup percentage to variable cost should be used?
A) 80.1%
B) 98.20%
C) 94.1%
D) 91.7%
E) 96.6%

Question

Hordel Company needs to determine a markup for a new product. Hordel expects to sell 5,000 units and wants a target profit of $82 per unit. Additional information is as follows:  Using the variable cost method, what markup percentage to variable cost should be used?
A) 80.1% 
B) 98.20% 
C) 94.1% 
D) 91.7% 
E) 96.6%

Quizplus · Accepted Answer

Markup % = [Target profit + Fixed overhead costs + Fixed administrative costs] / Total variable costs
[($82 × 5,000) + $42,000 + $31,000] / ($100 × 5,000) = 96.6%

Hordel Company Needs to Determine a Markup for a New