# A company has $50 per unit in variable costs and$1,200,000 per year in fixed costs. Demand is...

## Question:

A company has $50 per unit in variable costs and$1,200,000 per year in fixed costs. Demand is estimated to be 100,000 units annually.

What is the price if a markup of 40% on total cost is used to determine the price?

## Markup

Markup is a profit added by a bussiness (whether trading or manufacturing of goods) to the total cost of its goods, this represents the profit which that organization earns, it os either shown as % of cost or as a percentage of sales.

Total cost = variable cost per unit + fixed cost per unit = $50 +$1200000/100000 = $62 Price = total cost + markup = total cost * (1+ markup%) =$62 * 1.40 = \$86.8