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 $160,000?

c) If the desired profit is $160,000, what is the markup on variable costs to cover (1) unassigned costs and (2) desired profit?

Markup to cover unassigned costs Answer %

Markup to cover desired profits Answer %