ICANBusiness, Management and FinanceMarketing Fundamentals2024

A fast-moving consumer goods (FMCG) company in Kano incurs the following costs to bring a product to market: direct materials ₦2,400,000; direct labour ₦1,100,000; manufacturing overhead ₦500,000; selling and distribution expenses ₦300,000. If the company applies a 25% markup on total cost of production, what is the selling price per unit if 10,000 units are produced?

A₦500CORRECT
B₦550
C₦490
D₦625
AI
Toaster Teacher
Why the answer is A, and why the others tempt you.
Total cost of production = ₦2,400,000 + ₦1,100,000 + ₦500,000 = ₦4,000,000. Cost per unit = ₦4,000,000 ÷ 10,000 = ₦400. Selling price per unit = ₦400 × 1.25 = ₦500. Note that selling and distribution expenses are period costs excluded from the production cost markup base.
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