SOLUTION: 15-34

Cost-Plus Pricing Formula

(1) Variable manufacturing cost ............................. $300 $600 = $300 + (100%  $300)a
Applied fixed manufacturing cost ..................... 105

(2) Absorption manufacturing cost ........................ $405 $600 = $405 + (48.15%  $405)b
Variable selling and administrative cost .......... 45
Allocated fixed selling and
administrative cost .......................................... 75

(3) Total cost $525 $600 = $525 + (14.29%  $525)c

Variable manufacturing cost ............................. $300

Variable selling and administrative cost .......... 45

(4) Total variable cost .............................................. $345 $600 = $345 + (73.91%  $345)d

Explanatory Notes:

a($600 – $300) ÷ $300 = 100%

b($600 – $405) ÷ $405 = 48.15% (rounded)
c($600 – $525) ÷ $525 = 14.29% (rounded)
d($600 – $345) ÷ $345 = 73.91% (rounded)