Question

Brief Exercise 8-4 Morales Corporation produces microwave ovens. The following per unit cost information is available: direct materials $36, direct labor $25, variable manufacturing overhead $12, fixed manufacturing overhead $40, variable selling and administrative expenses $14, and fixed selling and administrative expenses $23. Its desired ROI per unit is $30.00. Compute its markup percentage using a total-cost approach. (Round answer to 2 decimal places, e.g. 10.50%.) Markup percentage %

Answer 1

Answer: 20.00% (2 decimal places)

Step-by-step explanation:

GIVEN the following ;

Direct materials = $36

Direct labor = $25

Variable manufacturing overhead = $12

Fixed manufacturing overhead = $40

Variable selling and administrative expenses = $14

Fixed selling and administrative expenses = $23

Desired Return On Investment per unit = $30

Compute markup percentage using total cost approach:

Total variable cost per unit :

$(36 + 25 +12 + 14) = $87

Total Fixed cost per unit:

$(40 + 23) = $63

Total cost per unit:

$(87 + 63) = $150

Using the standard pricing system:

Selling price = cost price + markup

Here,

markup = return on investment per unit

Therefore,

Markup percentage = (Return on investment per unit / Total cost

(30 ÷ 150) × 100

0.2 × 100 = 20%

Answer 2

20%

Step-by-step explanation:

Direct materials $36

Direct labor $25

Variable manufacturing overhead $12 Variable selling and administrative expenses $14

Total variable cost per unit $87

($36+$25+$12+$14)

Fixed manufacturing overhead $40,

Fixed selling and administrative expenses $23.

Total Fixed cost per unit $63

($40+$23)

Markup percentage using a total-cost approach

Variable cost per unit $87

Fixed cost per unit $63

Total cost ($87+$63) $150

Markup desired ROI per unit is $30.00

Selling price per unit $150+$30) $180

Markup(desired ROI per Unit / Total Unit Cost = Markup percentage

30 / 150 = 20%

Therefore the markup percentage is 20%