Question

Swan Company produces a 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, and the desired profit is $20 per unit. Determine the markup percentage on product cost.

Answer 1

Answer: 80%

Step-by-step explanation:

To answer this question we would need to divide the Required markup by the Unit product cost.

In calculating the Required Markup we say,

= Desired profit + fixed costs (selling and administrative costs)

This is to ensure that the profit is still acquired after spending on fixed costs.

= 20+ 8

= $28 is the required markup.

In calculating the unit product cost, we must remove the selling and administrative costs because they are not direct costs. That would lead us to,

= 43 - 8

= $35

Now dividing the required markup by the unit product cost we get,

= 28/35

= 0.8

= 80%

80% is markup percentage on product cost.