Question

Pauley company needs to determine a markup for a new product. pauley expects to sell 15,000 units and wants a target profit of $50 per unit. additional information is as follows: variable costs per unit fixed costs (total) direct materials$ 22overhead$ 53,650direct labor23general and administrative60,650overhead16 general and administrative25 using the variable cost method, what markup percentage to variable cost should be used?

O 69%
O 74%
O 90%
O 79%
O 78%

Answer 1

To determine the markup percentage to variable cost for Pauley Company, we calculate the total variable cost per unit, total cost per unit, and target selling price per unit. The markup percentage is calculated by dividing the markup amount by the total variable cost per unit.

option d is the correct

Step-by-step explanation:

To determine the markup percentage to variable cost, we need to calculate the total variable cost per unit. The total variable cost per unit is the sum of the direct materials, direct labor, and overhead costs per unit. Using the given information, the total variable cost per unit is $22 + $23 + $16 = $61.

Next, we calculate the total cost per unit by adding the fixed costs to the variable costs per unit. The total cost per unit is $61 + $60,650 = $60,711.

To calculate the target selling price per unit, we add the target profit of $50 to the total cost per unit. The target selling price per unit is $60,711 + $50 = $60,761.

Finally, we can calculate the markup percentage to variable cost by dividing the mark-up amount (target selling price per unit - total cost per unit) by the total variable cost per unit. Using the given information, the markup amount is $60,761 - $60,711 = $50, and the mark-up percentage to variable cost is ($50/$61) * 100 = 82%.