Assignment Task: Cost-Plus Pricing
World View is considering production of a lighted world globe that the company would price at a markup of 25 percent above full cost. Management estimates that the variable cost of the globe will be $80 per unit and fixed costs per year will be $240,000.
Required:
Q1. Assuming sales of 1,200 units, what is the full cost of a globe, and what is the price with a 25 percent markup?
Q2. Assume that the quantity demanded at the price calculated in part (1) is only 600 units. What is the full cost of the globe, and what is the price with a 25 percent markup?
Q3. Is the company likely to sell 600 units at the price calculated in part (2)?
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