Question

Garcia Co. sells snowboards. Each snowboard requires direct materials of $110, direct labor of $40, and variable overhead of $55. The company expects fixed overhead costs of $655,000 and fixed selling and administrative costs of $170,000 for the next year. It expects to produce and sell 11,000 snowboards in the next year.
What will be the selling price per unit if Garcia uses a markup of 15% of total cost? (Round your answer to 2 decimal places.)

Answer 1

First we will calculate the total cost of 11000 units produced and sold as below:

Total cost for 11000 units is:

Direct materials (11000 * $110) = $121000

Direct labor (11000 * $40) = $440000

Variable overhead (11000 * $55) = $605000

Fixed overhead = $655000

Fixed selling & admin costs = $170000

Total cost = $1991000

Total sales value = Total cost + 15% mark up

Total sales value = $1991000 + (15% * $1991000)

Total sales value = $1991000 + $298650 = $2289650

Total no. of units sold (given) = 11000

Selling price per unit = Total sales value / Total no. of units sold

Selling price per unit =$2289650 / 11000 = $208.15