Federer Industries Budgeted the Following Costs for the Production of Its

question 44

Multiple Choice

Federer Industries budgeted the following costs for the production of its only product, tennis balls, for the next fiscal year: $$\begin{array} { l r } \text { Materials } & \$ 35,000 \\\text { Labor } & 25,000 \\\text { Overhead: } & \\\text { Variable } & 30,000 \\\text { Fixed } & 15,000 \\\text { Selling and administrative: } & \\\text { Variable } & 7,500 \\\text { Fixed } & \underline { 12,500 } \\\text { Total costs } & \$ 125,000\end{array}$$ Federer Industries has a target profit of $50,000.The average target markup for setting prices as a percentage of total variable costs would be _____.

• A)158%
• B)38%
• C)63%
• D)79%

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Definitions:

Total Surplus

The combined measure of consumer surplus and producer surplus in a market, representing the total benefits to society from the production and consumption of goods and services.

Equilibrium

A state where market supply and demand balance each other, and as a result, prices become stable.

Pumpkin Market

The economic environment or system where pumpkins are bought, sold, or traded.

Equilibrium Price

The cost at which the amount of a product available matches the amount of the product sought after.