Galla Inc. needs to determine a price for a new product. Galla desires a 25% markup on the total cost of the product. Galla expects to sell 6420 units. Additional information is as follows: Variable product cost per unit $ 23 Variable administrative cost per unit 25 Total fixed overhead 46,500 Total fixed administrative 30,540 Using the total cost method what price should Galla charge?

The price Galla should charge is $75

Explanation:

Solution

Now

The total cost = variable product cost + variable administrative cost + fixed overhead + fixed administrative

= ($23 * 6,420) + ($25 * 6,420) + $46,500 + $30,540

= $147,660 + $160,500 + $46,500 + $30,540

= $385,200

Thus,

The total cost per unit = Total cost / units

= $385,200 / 6,420 units

= $60

Hence

The selling price should charge = Cost per unit * 1.25

= $60 * 1.25

= $75