Question

Variable Costs Fixed Costs Manufacturing $100,000 $50,000 Selling & Administrative 50,000 12,500 Total $150,000 $62,500 What is the markup on variable costs needed to break even? Select one: A. 41.67 percent B. 300.0 percent C. 33.3 percent D. 150.4 percent

Answer 1

A. 41.67 percent

Explanation:

Variable Costs:

Manufacturing: $100,000

Selling & Administrative: $50,000

Total Variable Costs: $100,000 + $50,000 = $150,000

To break even, the total revenue needs to cover both the variable costs and the fixed costs. The fixed costs in this case are $62,500.

Total Costs (Variable Costs + Fixed Costs): $150,000 + $62,500 = $212,500

To calculate the markup on variable costs needed to break even, we divide the fixed costs by the variable costs and multiply by 100:

Markup on Variable Costs = (Fixed Costs / Variable Costs) * 100

Markup on Variable Costs = ($62,500 / $150,000) * 100

Markup on Variable Costs = 0.4167 * 100

Markup on Variable Costs ≈ 41.67 percent

Therefore, the markup on variable costs needed to break even is approximately 41.67 percent. The correct option is A. 41.67 percent.