The Gargus Company, which manufactures projection equipment, is ready to introdu

Question

The Gargus Company, which manufactures projection equipment, is ready to introduce a new line of portable projectors. The following data are available for a proposed model:

Variable manufacturing costs - 270

Applied fixed manufacturing overhead - 135

Variable selling and administrative costs - 90

Applied fixed selling and administrative costs - 105

What price will the company charge if the firm uses cost=plus pricing based on variable manufacturing cost and a markup percentage of 200%?

a. 810

B. 450

C. 540

D. 675

E. Some other amount

Explanation / Answer

markup% = 100 * (salesprice - cost)/cost

since cost is based on variable manufacturing cost only

so cost = 270

=> markup% = 100 * (salesprice - 270)/270

=>200*270 = 100*(salesprice - 270)

=>salesprice = 270+540

=810 is correct answer(a)

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