Final answer:
The time charge per hour of direct labor for Cheng Company is $325, calculated by summing the direct labor rate, non-materials-related overhead, and the target profit margin. The materials markup percentage is 54%, which is the sum of the materials-related overhead and the target profit margin.
Step-by-step explanation:
The student is asking a business-related question, specifically about calculating direct labor charges and materials markup percentage for a company. This is a common question within the area of cost accounting and managerial accounting, which are subsets of business studies.
Time Charge Per Hour of Direct Labor
To calculate the time charge per hour of direct labor, we need to sum the direct labor rate, non-materials-related overhead, and the additional charge for the target profit margin. The direct labor rate is given as $220 per direct labor hour (DLH). The non-materials-related overhead is $30 per DLH.
To calculate the conversion cost markup for the target profit margin, we add 30% of the total of the direct labor rate and non-materials-related overhead.
Conversion cost = Direct Labor Rate + Non-Materials-Related Overhead = $220 + $30 = $250
Target Profit Margin on Conversion Cost = 30% of Conversion Cost = 0.30 x $250 = $75
Time Charge per hour = Conversion Cost + Profit Margin = $250 + $75 = $325 per DLH.
Materials Markup Percentage
To determine the materials markup percentage, we first consider the materials-related overhead, which is 24% of direct materials costs. Then, add the target profit margin of 30% to this percentage.
Total markup on materials = Materials-related Overhead + Profit Margin on Materials = 24% + 30% = 54%.