Avocado Ltd Produces Small Electronic Components for Kitchen Appliances

Avocado Ltd produces small electronic components for kitchen appliances. This year it expects to produce 10 000 units of component X. The variable manufacturing cost of component X is $2 per unit and the variable selling and administrative cost of component X is $3 per unit. In addition, to produce component X Avocado Ltd incurs annual fixed manufacturing cost of $50 000 and annual fixed selling and administrative cost of $60 000. If the target profit is $2 per unit, and using cost plus pricing approach, the mark up percentage based on total variable costs is:

A) 260%.
B) 80%.
C) 63.6%.
D) 12.5%.

Correct Answer:

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