Question

Calculate the variable costs of hand-made rocking chairs using the following information: Fixed costs: $300,000 Expected...

Calculate the variable costs of hand-made rocking chairs using the following information:

Fixed costs: $300,000

Expected unit sales: 600 rocking chairs

Retail price (including markup): $750

Markup (profit margin) 20%

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Homework Answers

Answer #1

Retail price

$          750.00

Markup

20%

Total Cost (750/120*100)

$          625.00

Total Fixed cost

$ 300,000.00

Expected Unit sales

600

Fixed cost per Unit

$          500.00

Total Cost per Unit

$          625.00

Less: Fixed Cost Per Unit

$          500.00

Variable cost per Unit

$          125.00

Note- If Retail price is $750 and markup% is 20% then it means Retail price is 20% of cost or 120% in total. When we divide Retail prive by 120% and Multiply the result by 100% we get total Cost.

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