Sarker manufacturing company produces and sells 40,000 units of a single product. Variable costs total $80,000 and fixed costs total $120,000. If each unit is sold for $8, what markup percentage is the company using?
A. 60.0%
B. 160%
C. 75%
D. 133%
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The unit cost is (including fixed costs) $5 and they sell for $8. What does that tell you?
To determine the markup percentage, we need to calculate the total cost and the selling price of each unit.
First, let's find the total cost:
Total Cost = Variable Costs + Fixed Costs = $80,000 + $120,000 = $200,000
Next, let's calculate the cost per unit:
Cost per Unit = Total Cost / Number of Units = $200,000 / 40,000 = $5
Now, let's calculate the selling price per unit:
Selling Price per Unit = $8
Finally, let's calculate the markup percentage:
Markup Percentage = ((Selling Price per Unit - Cost per Unit) / Cost per Unit) * 100
Markup Percentage = (($8 - $5) / $5) * 100
Markup Percentage = ($3 / $5) * 100
Markup Percentage = 60%
Therefore, the markup percentage used by the company is 60.0%.
The correct answer is A. 60.0%.