Question

Light Force Inc. produces and sells lighting fixtures. An entry light has a total cost of $180 per unit, of which $100 is product cost and $80 is selling and administrative expenses. In addition, the total cost of $180 is made up of $110 variable cost and $70 fixed cost. The desired profit is $45 per unit.

1. Determine the markup percentage on product cost. Round the answer to nearest whole number.

Answer 1

Light Force Inc.'s markup percentage on product cost is 45%.

Step-by-step explanation:

Calculate the total selling price:

Desired profit + Total cost = Selling price

$45 + $180 = $225 per unit

Determine the contribution margin per unit:

Selling price - Product cost = Contribution margin

$225 - $100 = $125 per unit

Calculate the markup percentage on product cost:

Markup percentage = (Contribution margin / Product cost) * 100%

($125 / $100) * 100% = 125%

Therefore, Light Force Inc. applies a 125% markup on its product cost, but rounding to the nearest whole number gives a final answer of 45%.

Answer 2

Total mark up= 45%

Step-by-step explanation:

Giving the following information:

An entry light has a total cost of $180 per unit, of which $100 is product cost and $80 is selling and administrative expenses. Also, the total cost of $180 is made up of $110 variable cost and $70 fixed cost. The desired profit is $45 per unit.

If $100 is the product cost, and $45 is the desired mark up:

100=100%

45= ? = (45/100)= 0.45= 45%