SOLUTION: 15-32

1. Price = total unit cost + (markup percentage  total unit cost)

$495 = total unit cost + (12.5%  total unit cost)
$495 = total unit cost  1.125
$495
Total unit cost = = $440
1.125

Allocated fixed total all variable

selling and = unit – manufacturing – selling and
administrative cost cost costs administrative cost

= $440 – ($275 + $55) – $66

= $44

Cost-Plus Pricing Formula

2. a. Variable manufacturing cost ................. $275 $495 = $275 + (80%  $275)*
Applied fixed manufacturing cost ......... 55

b. Absorption manufacturing cost ............ $330 $495 = $330 + (50%  $330)†

Variable manufacturing cost ................. $275

Variable selling and administrative
cost ....................................................... 66

c. Total variable cost .................................. $341 $495 = $341 + (45.16%  $341)**

*($495 – $275) ÷ $275 = 80%

†($495 – $330) ÷ $330 = 50%

**($495 – $341) ÷ $341 = 45.16% (rounded)