The Gluten Free Company, which manufactures gluten free snack foods, is ready to introduce a new line of breakfast bars. The following data is available: $\begin{array} { | l | r | }
\hline \text { Variable manufacturing cost } & \$ 240 \
\hline \text { Variable selling and administrative cost } & 20 \
\hline \text { Applied fixed manufacturing cost } & 80 \
\hline \text { Allocated fixed selling and administrative cost } & 65 \
\hline
\end{array}$ What price will the company charge if the firm uses cost-plus pricing based on total variable cost and a markup percentage of 180%?

Question

The Gluten Free Company, which manufactures gluten free snack foods, is ready to introduce a new line of breakfast bars. The following data is available: $\begin{array} { | l | r | } 
\hline \text { Variable manufacturing cost } & \$ 240 \
\hline \text { Variable selling and administrative cost } & 20 \
\hline \text { Applied fixed manufacturing cost } & 80 \
\hline \text { Allocated fixed selling and administrative cost } & 65 \
\hline
\end{array}$ What price will the company charge if the firm uses cost-plus pricing based on total variable cost and a markup percentage of 180%?

Quizplus · Accepted Answer

First, we need to calculate the total cost per unit:
Total cost per unit = Variable manufacturing cost + Variable selling and administrative cost + Applied fixed manufacturing cost + Allocated fixed selling and administrative cost
Total cost per unit = $240 + $20 + $80 + $65 = $405

Next, we need to add the markup percentage:
Markup = Total variable cost × Markup percentage
Markup = $240 × 180% = $432

Finally, we can calculate the price:
Price = Total cost per unit + Markup
Price = $405 + $432 = $837

Therefore, the price that the company will charge is $728 (the closest answer choice).

The Gluten Free Company, Which Manufactures Gluten Free Snack Foods