Final answer:
The markup percentage for Pharaoh Corporation, calculated using the total cost approach, is found to be 19.28% after adding all costs and desired ROI per unit to determine the selling price.
Step-by-step explanation:
The student has asked how to calculate the markup percentage using a total cost approach for Pharaoh Corporation, which produces microwave units. To find the markup percentage, we need to first calculate the total cost by adding direct materials, direct labor, variable manufacturing overhead, fixed manufacturing overhead, variable selling and administrative expenses, and fixed selling and administrative expenses. Next, we add the desired ROI per unit to get the total cost plus desired ROI, which will be the selling price. The markup percentage is then calculated by taking the difference between the selling price and the total cost, dividing it by the total cost, and then converting it to a percentage.
Using the information provided, the total cost per unit is calculated as follows:
- Direct Materials: $38
- Direct Labor: $22
- Variable Manufacturing Overhead: $20
- Fixed Manufacturing Overhead: $43
- Variable Selling and Administrative Expenses: $16
- Fixed Selling and Administrative Expenses: $27
The sum of the costs is $166 per unit. Adding the desired ROI per unit of $32 gives us a selling price of $198 per unit. The markup percentage is then (198 - 166) / 166 * 100%, which equals 19.28% (rounded to two decimal places).