Agassi Industries budgeted the following costs for the production of its one and only product, tennis balls, for the next fiscal year: $$\begin{array} { l c }
\text { Materials } & \$ 35,000 \
\text { Labor } & 25,000 \
\text { Overhead: } & \
\text { Variable } & 30,000 \
\text { Fixed } & 15,000 \
\text { Selling and administrative: } \
\text { Variable } & 7,500 \
\text { Fixed } & \underline { 12,500 } \
\text { Total costs } & \$ 125,000
\end{array}$$ Agassi Industries has a target profit of $30,000. The average target markup for setting prices as a percentage of total variable costs would be:

Question

Agassi Industries budgeted the following costs for the production of its one and only product, tennis balls, for the next fiscal year: $$\begin{array} { l c } 
\text { Materials } & \$ 35,000 \
\text { Labor } & 25,000 \
\text { Overhead: } & \
\text { Variable } & 30,000 \
\text { Fixed } & 15,000 \
\text { Selling and administrative: } \
\text { Variable } & 7,500 \
\text { Fixed } & \underline { 12,500 } \
\text { Total costs } & \$ 125,000
\end{array}$$ Agassi Industries has a target profit of $30,000. The average target markup for setting prices as a percentage of total variable costs would be:

Quizplus · Accepted Answer

The total variable costs are $72,500 (Materials $35,000 + Labor $25,000 + Variable Overhead $30,000 + Variable Selling and Administrative $7,500). The target profit is $30,000, so the total cost including profit is $155,000. The markup percentage is calculated as ($155,000 - $72,500) / $72,500 = 59%.

Agassi Industries Budgeted the Following Costs for the Production of Its