# The Falling Snow Company is considering the production of a lighted world globe that the company...

## Question:

The Falling Snow Company is considering the production of a lighted world globe that the company would price at a markup of 0.30 above full cost. Management estimates that the variable cost of the globe will be $68 per unit and fixed costs per year will be$240,000.

Assuming sales of 1,200 units, what is the full selling price of a globe with a 0.30 markup?

## Variable and Fixed Cost

Variable costs are costs incurred that are directly related to the number of units produced. As the number of units increases, the variable costs also increase. Fixed costs are costs that are not directly related to the number of units produced and are fixed in amount for a specified period of time.

Full selling price of the globe is computed as follows:

 Fixed cost per unit ($240,000 / 1,200 units)$200 Add: Variable cost per unit 68 Total cost per unit $268 Markup ($268 * 0.30) 80.4 Full Selling price \$348.40 