Hordel Company needs to determine a markup for a new product. Hordel expects to sell 5,000 units and wants a target profit of $82 per unit. Additional information is as follows: Variable product cost per unit $ 79 Variable administrative cost per unit 21 Total fixed overhead 42,000 Total fixed administrative 31,000 Using the variable cost method, what markup percentage to variable cost should be used?

96.60%

Explanation:

Total Variable Cost = Variable product cost + Variable administrative cost per unit

= (5,000 * $79 per unit) + (5,000 * $21 per unit)

= $395,000 + $105,000

= $500,000

Total Fixed Cost = Total fixed overhead + Total fixed Administrative Cost

= $42,000 + $31,000

= $73,000

Total fixed cost per unit = $73,000 : 5,000

= 14.6

Total Cost = Total Variable Cost + Total Fixed Cost

= $500,000 + $73,000

= $573,000

Target profit = 5,000 * $82

= $410,000

Desired Selling Price = Total cost + Target profit

= $573,000 + $410,000

= $983,000

Desired Selling Price per unit = $983,000 : 5,000

= $196.6

Therefore,

Mark up percentage on Variable Cost:

= (Desired Selling Price per unit - Variable Cost per unit) : (Variable Cost per unit) * 100

= [ (196.60 - 100) : (100) ] * 100

= 96.60%