How to Do Cost Plus Markup Problems
- 1). Determine the total estimated cost involved in the production of all units to be sold. Add together the cost of production and all variable costs. Variable costs can include labor, rent and electricity.
- 2). Divide the total estimated cost by the total number of units produced. This will determine the overall cost to produce one unit.
- 3). Divide the unit cost by one minus the desired return on sales to calculate the cost plus markup price. For example, if the total estimated cost for 1,000 units is $8,000, the total cost to produce one unit is $8. If the desired return on sales is 30 percent, this would be calculated through the equation $8 / (1 - 0.30), yielding a cost-plus markup price of $11.42.
