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.

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

Learn more about this topic:

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How to Calculate Markup: Definition & Formula

from Principles of Marketing: Help and Review

Chapter 12 / Lesson 22
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