Tech Coms predicted 2017 variable and fixed costs are as follows:

Variable Costs Fixed Costs

Manufacturing.$480,000 $315,900

Selling and administrative$216,000 $60,000

Total$696,000 $376,400

Tech Com is a small company producing a wide variety of computer interface devices. Per-unit manufacturing cost information about one of these products, a high-capacity flash drive, is as follows:

Direct Materials$10

Direct labor..9

Manufacturing

Variable.7

Fixed.. 9

Total manufacturing costs...$35

Variable selling and administrative costs for the flash drive is $6 per unit. Management has set a 2017 target profit of $250,000 on the sale of the flash drive.

Required

1. Determine the markup percentage on variable costs required to earn the desired profit.

2. Use variable cost markup to determine a suggested selling price for the flash drive.

3. For the flash drive, break the markup on variable costs into separate parts for fixed costs and profit. Explain the significance of each part.

4. Determine the markup percentage on manufacturing costs required to earn the desired profit.

5. Use the manufacturing costs markup to determine a suggested selling price for the flash drive.

6. Evaluate the variable and the manufacturing cost approaches to determine the markup percentage.