Answer:
Galla should charge $47
Explanation:
Data provided in the question:
Desired markup = 25% of the total cost
Units to be sold = 5,000
Variable product cost per unit = $15
Variable administrative cost per unit = 10
Total fixed overhead = $45,000
Total fixed administrative = $18,000
Now,
Total variable cost
= Variable product cost per unit × Number of units to be sold
= $15 × 5,000
= $75,000
Total variable administrative cost
= Variable administrative cost per unit × Number of units to be sold
= $10 × 5,000
= $50,000
Therefore,
Total cost
= Total variable cost + Total variable administrative cost + Total fixed overhead + Total fixed administrative
= $75,000 + $50,000 + $45,000 + $18,000
= $188,000
Thus,
Price per unit = Total cost ÷ Number of units to be sold
= $188,000 ÷ 5,000
= $37.6
Price after markup = Price per unit + 25% of price per unit
= $37.6 + ( 0.25 × $37.6 )
= $37.6 + $9.4
= $47
Hence,
Galla should charge $47
