CMA Final · Strategic Cost Management · Pricing Decisions and Strategies
Sunrise Pens Ltd. has a variable cost of ₹60 per unit and fixed costs of ₹4,00,000 for the year. It plans to sell 10,000 units and wants a mark-up of 25% on total (full) cost. What is the selling price per unit?
The selling price is ₹125 per unit. Full cost is variable cost ₹60 plus fixed cost ₹40 per unit, totalling ₹100, and a 25% mark-up on this full cost adds ₹25. Using only variable cost as the base would understate the price.
- A₹100.00
- B₹125.00Correct
- C₹75.00
- D₹118.75
Explanation
Fixed cost per unit = 4,00,000/10,000 = ₹40. Full cost per unit = 60 + 40 = ₹100. Mark-up 25% on full cost = ₹25, so price = ₹125. Applying 25% on variable cost only gives ₹75 for the mark-up base (60 + 15), which is the wrong base.
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