Question

The following data pertain to Arctic Company's commercial snow thrower: Variable manufacturing cost $ 620 Applied fixed manufacturing cost 270 Variable selling and administrative cost 170 Allocated fixed selling and administrative cost 135 Required: For each of the following cost bases, determine the appropriate percentage markup that will result in a price of $1,530 for the snow thrower. Note: Round your percentage answers to 2 decimal places.

Answer 1

To achieve a selling price of $1,530 for the snow thrower, the percentage markup on total costs is 28.03%, on manufacturing costs is 71.91%, and on variable costs is 93.67%.

Step-by-step explanation:

To calculate the appropriate percentage markup based on various cost bases for Arctic Company's snow thrower priced at $1,530, we can add up the relevant costs and compute the markup needed. For the total cost that includes variable manufacturing, applied fixed manufacturing, variable selling and administrative, and allocated fixed selling and administrative costs ($620 + $270 + $170 + $135), the combined cost amounts to $1,195. The required markup on this total cost to achieve the selling price of $1,530 is calculated by the formula [(Selling Price - Total Cost) / Total Cost] * 100%. Plugging in the numbers results in a markup of [(1530 - 1195) / 1195] * 100%, which equals 28.03%.

However, if we focus solely on the manufacturing cost (variable and fixed) which totals $890 ($620 + $270), the markup percentage needed to reach the $1,530 price point is calculated as [(1530 - 890) / 890] * 100%, resulting in a markup of 71.91%.

Finally, if we consider only the variable costs (manufacturing and selling), totaling $790 ($620 + $170), the needed markup to arrive at the selling price would be [(1530 - 790) / 790] * 100%, yielding a markup of 93.67%.