The total cost concept is the most convenient method for determining a product's selling price...
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Accounting
The total cost concept is the most convenient method for determining a product's selling price if a company includes all manufacturing, selling, and administrative costs associated with the product in its reported cost. A markup is then added to achieve the firm's desired profit.
For example, assume that the following costs are incurred to make 10,000 units of a product:
Variable manufacturing costs $5 per unit
Variable selling and administrative costs $2 per unit
Fixed factory overhead costs $80,000
Fixed selling and administrative expenses $30,000
Instructions
Calculate the total cost to make 10,000 units and the cost to make one unit?
Next, this company wishes to price the product so that a profit of $27,000 will be made if all 10,000 units are sold?
Calculate the selling price of the product if it is marked up 15 percent above the total cost.
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