The Swan Company produces their 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 The desired profit is $20 per unit. Determine the mark up percentage on variable cost.
A) 100%
B) 110%
C) 80%
D) 46.5%

Question

Quizplus · Accepted Answer

To determine the markup percentage on variable cost, we need to first calculate the total cost per unit.

Total cost per unit = Variable cost per unit + Selling and administrative cost per unit 
Total cost per unit = $30 + $8 
Total cost per unit = $38

Now we can calculate the markup percentage on variable cost:

Markup percentage on variable cost = (Desired profit per unit / Variable cost per unit) x 100% 
Markup percentage on variable cost = ($20 / $30) x 100% 
Markup percentage on variable cost = 66.67%

Finally, we can calculate the markup percentage on total cost:

Markup percentage on total cost = (Markup percentage on variable cost / (1 - Selling and administrative cost percentage)) x 100% 
Markup percentage on total cost = (66.67% / (1 - ($8/$38))) x 100% 
Markup percentage on total cost = 110%

Therefore, the answer is B, 110%.

The Swan Company Produces Their Product at a Total Cost