The Sierra Company produces its product at a total cost of $1,400 per unit. Of t

Question

The Sierra Company produces its product at a total cost of $1,400 per unit. Of this amount, $950 is product cost and $450 is selling and administrative expenses. In addition, the total cost of $1,400 is made up of $1,190 variable cost and $210 fixed cost. The desired profit is $210 per unit. Determine the mark up percentages under each of the following cost-plus methods. If required, round your answers to one decimal place.

(a) Total cost concept %

(b) Product cost concept %

(c) Variable cost concept %

Explanation / Answer

Mark-up percentage = (Desired profit+Selling and administrative expenses)/Product cost

=(210+450)/950=

0.695%

(rounded off)

Mark-up percentage = (Desired profit+Selling and administrative expenses)/Product cost

=(210+450)/950=

0.695%

(rounded off)

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