Kulvekowski Company has budgeted sales of $30,000 with the following budgeted costs:

Direct materials $6,300

Direct labor $4,100

Variable factory overhead $3,700

Fixed factory overhead $5,600

Variable selling and administrative costs $2,400

Fixed selling and administrative costs $3,200

What is the average target markup percentage for setting prices as a percentage of total costs?

A. 15.7%

B. 20.1%

C. 18.6%

D. none of the above

Option (c) is correct.

Explanation:

Given that,

Sales = $30,000

Direct materials = $6,300

Direct labor = $4,100

Variable factory overhead = $3,700

Fixed factory overhead = $5,600

Variable selling and administrative costs = $2,400

Fixed selling and administrative costs = $3,200

Total variable cost:

= Direct Material + Direct labor + Variable factory overhead + Variable selling and administrative costs

= $6,300 + $4,100 + $3,700 + $2,400

= $16,500

Total fixed cost:

= Fixed factory overhead + Fixed selling and administrative costs

= $5,600 + $3,200

= $8,800

Total cost = Fixed cost + Variable cost

= $8,800 + $16,500

= $25,300

Profit = Sales - Total cost

= $30,000 - $25,300

= $4,700

Mark Up as percentage of cost:

= (Profit : cost) * 100

= ($4,700 : $25,300) * 100

= 18.6%