Hordel Company needs to determine a markup for a new product. Hordel expects to sell 6,100 units and wants a target profit of $93 per unit. Additional information is as follows: Variable product cost per unit $ 80 Variable administrative cost per unit 35 Total fixed overhead 53,000 Total fixed administrative 11,050 Using the variable cost method, what markup percentage to variable cost should be used

See below

Explanation:

Total variable cost = Variable product cost + Variable administrative cost per unit

= (6,100 × $80 per unit) + (6,100 × $35)

= $488,000 + $213,500

= $701,500

Total fixed cost = Total fixed overhead + Total fixed administrative cost

= $53,000 + $11,050

= $64,050

Total fixed cost per unit = $64,050 ÷ 6,100 = $10.5

Total cost = Total variable cost + Total fixed cost

= $701,500 + $64,050

= $765,550

Target profit = 6,100 × $93 = $567,300

Desired selling price = Total cost + Target profit

= $765,550 + $567,300

= $1,332,850

Desired selling price per unit = $1,332,850 ÷ 6,100 = $218.5

Therefore,

Markup percentage on variable cost

= [(Desired selling price per unit - Variable cost per unit) ÷ Variable cost per unit] × Variable cost per unit

= [($218.5 - 115) ÷ (115)] × 115

= 103.5%

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