Question

Strawberry Mansion Company sells its special strawberry pie for $18. The total cost to produce the pie is $10. Of this amount, $2 per unit is selling costs. The total variable cost is $7. The desired profit is $8 per unit. What is the markup percentage on product cost?

Answer 1

Answer:

Product cost:                     $

Variable production cost 5.00

Variable selling cost        2.00

Total variable cost           7.00                                                        

Total fixed cost                 3.00

Total cost                          10.00

Desired profit                   8.00

Selling price                       18.00

Mark-up percentage on product cost  

=   8   x 100

    10          

= 80%                                        

Explanation:

In this case, we will divide the profit by the total cost in order to obtain the mark-up percentage on cost. The total cost equals $10 while the profit is $8.  The division of profit by total cost multiplied by 100 gives the mark-up percentage on product cost.