1. Brandon Company prices its products using a 40% markup on total manufacturing cost to cover selling and administrative expenses and to provide a reasonable return on investment.

Cost per Unit

Direct materials $34

Direct labor 20

Variable manufacturing overhead 27

Variable selling and administrative expenses 10

Fixed manufacturing overhead totals $150,000 per year. Fixed selling and administrative expenses are $100,000 per year. The average number of units sold per year is 5,000.

Using these data and the functional cost approach to pricing products, estimate the NORMAL SELLING PRICE. Note: The markup will end up being 40% of the selling price.

a. $175

b. $185

c. $155

d. $135

e. $165