Assume that Mucky Duck uses cost-plus pricing, setting the selling price 25% above its costs. What would be the price charged for the All-Body swimsuit?

The Mucky Duck swimsuits: Acc 346 Management Accounting E11-3

Mucky Duck uses the “cost-plus” pricing model to price its All-Body suit. In this case, the sale price is 25% higher than the actual cost. This cost is the direct costs of producing the suit, including materials, labor etc. plus a percentage for administrative and overhead fees.

To determine total cost, you will need to know all the direct costs that are associated with manufacturing the All-Body suit. Materials such as stitching and fabric, as well as labor costs for sewing and cutting pieces, as well as transportation charges to reach suppliers and stores, as needed, as taxes on the raw materials that are used, can be included. After all costs have been calculated, they must be added up to obtain a total cost.

After determining our total price before adding any mark-up, we multiply it by 1.25 or 25%. This will provide us with our final sales price. So if for example our total base cost was $50 then multiplying this by 1.25 gives us a final sale price of $62.50 – this being what Mucky Duck would charge customers for their All-Body Swimsuit under their current pricing structure when taking into consideration that they use Cost Plus Pricing at a rate of 25%.