Question

Morales Corporation produces microwave ovens. The following per unit cost information is available: direct materials $36, direct labor $25, variable manufacturing overhead $13, fixed manufacturing overhead $42, variable selling and administrative expenses $10, and fixed selling and administrative expenses $30. Its desired ROI per unit is $27. Compute the markup percentage using absorption-cost pricing. (Round answer to 2 decimal places, e.g. 10.50%.)

Answer 1

19.01%

Step-by-step explanation:

Given the following information:

• direct materials $36
• direct labor $25
• variable manufacturing overhead $13
• variable selling and administrative expenses $10

=> the total variable cost: 36+25+13+10 = $85

Given the following information:

• fixed manufacturing overhead $42
• fixed selling and administrative expenses $30

=> the total fixed cost per unit: 42+30 = $72

=>Total cost = the total variable cost + the total fixed cost per unit

= $85 + $72

= $157

Its desired ROI per unit is $27

As we know, the markup percentage can be determined by the following formula:

= desired ROI per unit / Total cost

= $30/$157*100%

= 19.01%