Question

A marketer wants to market a product. The unit variable cost for producing this product is $16. The fixed cost is $400,000. The marketer expects to sell 80,000 units of the product and wants to earn a 30 percent markup on sales. How much should the markup price be for this product?

Answer 1

Markup price is simple words is the amount of profit that the producer earns on a particular product. Every seller has to add up the markup price to earn a profit in his business.

First of all, we will add up all the cost = number of units x variable cost per unit + fixed cost

= 80,000 x $16 + $400,000

=$1,680,000

Cost price per unit = total cost/number of units

= $ 1,680,000/ 80,000

= $21

to calculate the markup price,

Selling price per unit/ Markup price = cost per unit / (1 - markup percent)

= $21 / 0.70

=$30