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.
Answer and Explanation:
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|
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from Principles of Marketing: Help and ReviewChapter 12 / Lesson 22