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How does a "markup" work when you are creating an estimate?Select an answer:On the estimate you send to the customer, you can provide how you arrived at the line item total.It is how tax is added for products and for services, if your state taxes services.You can add an amount to the unit price, which will not appear on the estimate you send to the customer.It is how the line item total is calculated by multiplying unit price times number of units.

Question

How does a "markup" work when you are creating an estimate?Select an answer:On the estimate you send to the customer, you can provide how you arrived at the line item total.It is how tax is added for products and for services, if your state taxes services.You can add an amount to the unit price, which will not appear on the estimate you send to the customer.It is how the line item total is calculated by multiplying unit price times number of units.

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Solution

The term "markup" in the context of creating an estimate refers to the amount added to the cost price of goods or services to cover overheads and profit. Here's how it works:

  1. Determine the cost of the product or service: This is the amount it costs you to produce or provide the service. This could include the cost of raw materials, labor, etc.

  2. Decide on your markup percentage: This is the percentage you add to your cost to determine your selling price. The markup percentage can vary widely depending on the industry and the type of product or service.

  3. Calculate the selling price: Multiply your cost by the markup percentage, then add that amount to your original cost to get the selling price.

For example, if your cost for a product is 50andyoudecideonamarkupof2050 and you decide on a markup of 20%, you would add 10 (50x0.20)tothecostoftheproduct.So,thesellingpriceyouwouldlistontheestimatewouldbe50 x 0.20) to the cost of the product. So, the selling price you would list on the estimate would be 60.

In the context of the options provided, the closest answer would be "You can add an amount to the unit price, which will not appear on the estimate you send to the customer." This is because the markup is typically included in the selling price and not itemized separately on the estimate.

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Pauley Company needs to determine a markup for a new product. Pauley expects to sell 15,000 units and wants a target profit of $54 per unit. Additional information is as follows: Variable Costs per Unit   Fixed Costs (total)  Direct materials $ 24 Overhead $ 49,750Direct labor 25 General and administrative 56,750Overhead 18    General and administrative 27     Using the variable cost method, what markup percentage to variable cost should be used?

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