Cost$-$Based Pricing

and Markups with Variable Costs

Compu Services provides computerized inventory consulting. The office and computer expenses are $$400,000$ annually and are not assigned to specific jobs. The consulting hours available for the year total $20,000,$ and the average consulting hour has $$20$ of variable costs.

$($a$)$ If the company desires a profit of $$140,000,$ what should it charge per hour?

$Answer

$($b$)$ What is the markup on variable costs if the desired profit is $$120,000?$

Answer

$\%$

$($c$)$ If the desired profit is $$40,000,$ what is the markup on variable costs to cover $(1)$ unassigned costs and $(2)$ desired profit?

Markup to cover unassigned costsAnswer

$\%$

Markup to cover desired profitsAnswer

$\%$