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12 February, 12:02

Galla Inc. needs to determine a price for a new product. Galla desires a 25% markup on the total cost of the product. Galla expects to sell 6420 units. Additional information is as follows: Variable product cost per unit $ 23 Variable administrative cost per unit 25 Total fixed overhead 46,500 Total fixed administrative 30,540 Using the total cost method what price should Galla charge?

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  1. 12 February, 12:19
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    The price Galla should charge is $75

    Explanation:

    Solution

    Now

    The total cost = variable product cost + variable administrative cost + fixed overhead + fixed administrative

    = ($23 * 6,420) + ($25 * 6,420) + $46,500 + $30,540

    = $147,660 + $160,500 + $46,500 + $30,540

    = $385,200

    Thus,

    The total cost per unit = Total cost / units

    = $385,200 / 6,420 units

    = $60

    Hence

    The selling price should charge = Cost per unit * 1.25

    = $60 * 1.25

    = $75
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