Swan Company produces a product at a total cost of $43 per unit. Of this amount, $8 per unit is selling and administrative costs. The total variable cost is $30 per unit, and the desired profit is $20 per unit. Determine the markup percentage on product cost.
A) 80%
B) 46.5%
C) 70%
D) 110%

Question

Quizplus · Accepted Answer

The markup percentage on product cost is calculated as the desired profit divided by the total product cost (excluding selling and administrative costs). The total product cost is $43 - $8 = $35 per unit. The desired profit is $20 per unit. Therefore, the markup percentage = ($20 / $35) * 100% = 57.14%, which is not an option provided. However, if we consider the markup on the variable cost (which is $30), the calculation would be ($20 / $30) * 100% = 66.67%, which is also not an option provided. It seems there's a misunderstanding in the calculation or the options provided. Given the options, none directly match the calculations based on the information provided. Re-evaluating the approach: If we consider the markup based on the total cost including selling and administrative costs ($43), the calculation should be based on the cost structure provided. However, without a direct match in the calculations to the options and based on the initial mistake in calculation interpretation, there's a need to correct the approach. The correct calculation for markup on the total product cost excluding selling and administrative costs should indeed focus on the relationship between profit and the base cost used for markup calculation. The error in the initial explanation was in the calculation process and the interpretation of the base for markup. Given the discrepancy and re-evaluating the provided options and calculations, the correct approach to find the markup percentage on the total product cost (excluding S&A costs) or on the variable cost was misunderstood, leading to incorrect options being considered as viable answers. The correct calculation involves understanding the base cost for markup (either total cost or variable cost) and how the desired profit percentage is calculated relative to this base. Without the correct base and calculation, the provided options do not align with the standard markup calculation formula.

Swan Company Produces a Product at a Total Cost of $43