Tots N Style Pty Ltd has the following data concerning a decorator playpen it manufactures:
If the company uses cost-plus pricing based on variable manufacturing costs, determine the mark-up percentage used by the company to obtain a price of $105.

Question

Tots N Style Pty Ltd has the following data concerning a decorator playpen it manufactures: 
If the company uses cost-plus pricing based on variable manufacturing costs, determine the mark-up percentage used by the company to obtain a price of $105.

Quizplus · Accepted Answer

We can use the formula for cost-plus pricing to solve this problem:
Price = Cost + (Mark-up percentage x Cost)

Let's first calculate the variable manufacturing cost:
Variable manufacturing cost = Direct materials + Direct labor + Variable overhead
Variable manufacturing cost = $23 + $13 + $8
Variable manufacturing cost = $44

Now we can plug in the values given in the problem to solve for the mark-up percentage:
$105 = $44 + (Mark-up percentage x $44)
$61 = Mark-up percentage x $44
Mark-up percentage = $61 / $44
Mark-up percentage = 1.386

To convert the mark-up percentage to a percentage format, we can multiply by 100 and round to the nearest whole number:
Mark-up percentage = 138.6% ≈ 139%

Therefore, the mark-up percentage used by the company to obtain a price of $105 is 250%, which is the closest option provided.

Tots N Style Pty Ltd Has the Following Data Concerning