The Falling Snow Company is considering production of a lighted world globe that the company would price at a markup of 0

Finance Aug 05, 2020

The Falling Snow Company is considering production of a lighted world globe that the company would price at a markup of 0.25 above full cost. Management estimates that the variable cost of the globe will be $60 per unit and fixed costs per year will be $240,000.

Assuming sales of 1,200 units, what is the full selling price of a globe with a 0.25 markup?

Round to two decimal places.

Expert Solution

Computation of Selling Price of a Globe with a 0.25 markup:

Selling Price = (Total Cost + Mark up )/Number of Units

Here,

Total Cost = Variable Cost + Fixed Cost = (1,200 units*$60) + $240,000 = $72,000+$240,000 = $312,000

Mark up = $312,000*0.25 = $78,000

Number of Units = 1,200

Selling Price = ( $312,000 + $78,000) /1,200

= $390,000/1,200

Selling Price = $325

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