SawTown Tools Uses Cost-Plus Pricing with a 30% Mark-Up

question 117

Multiple Choice

SawTown Tools uses cost-plus pricing with a 30% mark-up.The company is currently selling 80,000 units at $65 per unit.Each unit has a variable cost of $47.In addition, the company incurs $240,000 in fixed costs annually.If demand falls to 40,000 units and the company wants to continue to charge the same price per unit, what markup percentage is the company using?

• A)22.6%
• B)26.2%
• C)36.1%
• D)30.1%

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Definitions:

European Option

A type of option contract that can only be exercised at the expiration date, not before.

American Option

A type of options contract that allows holders to exercise their right to buy or sell the underlying asset at any time before the expiration date.

European Option

A type of financial derivative that gives an investor the right, but not the obligation, to buy or sell an asset at a specified price on the option's expiration date.

Warrant

A financial instrument that gives the holder the right, but not the obligation, to buy a company's stock at a specific price before a certain date.