Direct costs are 37,000, overhead is 12%, and profit is 5%. What is the selling price?

Direct costs are 37,000, overhead is 12%, and profit is 5%. What is the selling price?

• A. 43,000.00
• B. 44,000.00
• C. 44,578.32
• D. 46,000.00

Answer: (C)

When overhead and profit are expressed as percentages of the selling price, you set up the price P so that it covers direct costs plus these percentages of P itself. Let P be the selling price. Overhead = 0.12P and profit = 0.05P, while direct costs are 37,000. So the equation is: P = 37,000 + 0.12P + 0.05P Combine the percentage terms: 0.12P + 0.05P = 0.17P. Then: P - 0.17P = 37,000 0.83P = 37,000 P = 37,000 / 0.83 ≈ 44,578.32 So the selling price is about 44,578.32. This approach matches the idea that overhead and profit are taken as a share of the final selling price. If they were based on cost instead, you’d get a different result.

When overhead and profit are expressed as percentages of the selling price, you set up the price P so that it covers direct costs plus these percentages of P itself. Let P be the selling price. Overhead = 0.12P and profit = 0.05P, while direct costs are 37,000. So the equation is:

P = 37,000 + 0.12P + 0.05P

Combine the percentage terms: 0.12P + 0.05P = 0.17P. Then:

P - 0.17P = 37,000

0.83P = 37,000

P = 37,000 / 0.83 ≈ 44,578.32

So the selling price is about 44,578.32. This approach matches the idea that overhead and profit are taken as a share of the final selling price. If they were based on cost instead, you’d get a different result.