The total cost concept is the most convenient method for determining a product's selling price if a company includes all manufacturing, selling, and administrative costs associated with the product in its reported cost. A markup is then added to achieve the firm's desired profit.

For example, assume that the following costs are incurred to make 10,000 units of a product:

• Variable manufacturing costs $5 per unit
• Variable selling and administrative costs $2 per unit
• Fixed factory overhead costs $80,000
• Fixed selling and administrative expenses $30,000

Instructions

1. Calculate the total cost to make 10,000 units and the cost to make one unit?
2. Next, this company wishes to price the product so that a profit of $27,000 will be made if all 10,000 units are sold?
3. Calculate the selling price of the product if it is marked up 15 percent above the total cost.