Question

Garcia Co. sells snowboards. Each snowboard requires direct materials of $122, direct labor of $52, and variable overhead of $67. The company expects fixed overhead costs of $679,000 and fixed selling and administrative costs of $114,000 for the next year. It expects to produce and sell 12,200 snowboards in the next year. What will be the selling price per unit if Garcia uses a markup of 10% of total cost? (Round your answer to 2 decimal places.)

Answer 1

$336.60 per unit

Step-by-step explanation:

The computation of selling price per unit is given below:-

For computing the selling price per unit first we need to follow some steps which is shown below:-

Total fixed costs = Fixed overhead costs + Fixed selling and administrative costs

= $679,000 + $114,000

= $793,000

Fixed cost per unit = Total fixed costs ÷ Number of units expected to be produced

= $793,000 ÷ 12,200

= $65 per unit

Total costs per unit = Direct materials + Direct labor + Variable overhead + Fixed cost per unit

= $122 + $52 + $67 + $65

= $306

Now,

Selling price per unit = Total cost per unit × (1 + Markup)

= $306 × (1 + 10%)

= $306 × 1.1

= $336.60 per unit