Galla seeks profit's crown, cost's canvas unfolds. Twenty-five whispers, markup's bold. Variable threads, fixed burdens bind, total whispers, where price can find. One forty-two echoes, the answer's chime, Galla's market sings, one hundred forty-two climbs.
The correct answer is b. $142.00.
Here's how to calculate the selling price using the total cost method with a 25% markup:
1. Calculate the total variable cost per unit:
Total Variable Cost per unit = Direct Materials + Direct Labor + Overhead + General & Administrative
Total Variable Cost per unit = $24 + $25 + $23 + $29 = $101
2. Calculate the total cost per unit:
Total Cost per unit = Total Variable Cost per unit + Fixed Cost per unit
Total Cost per unit = $101 + ($45,000 + $18,000) / 5,000 units
Total Cost per unit = $101 + $12.60 = $113.60
3. Calculate the desired markup amount:
Markup Amount = Total Cost per unit x Markup Percentage
Markup Amount = $113.60 x 0.25 = $28.40
4. Calculate the selling price:
Selling Price = Total Cost per unit + Markup Amount
Selling Price = $113.60 + $28.40 = $142.00
Therefore, Galla should charge $142.00 per unit for their new product based on the total cost method with a 25% markup.
The other options are incorrect because:
- a. $126.25: This only adds a 20% markup instead of 25%.
- c. $137.50: This doesn't account for the fixed costs per unit.
- d. $130.75: This miscalculates the total variable cost per unit.
- e. $113.60: This is only the total cost per unit without the markup.