Question

The following per unit cost information is available: direct materials $36, direct labor $24, variable manufacturing overhead $18, fixed manufacturing overhead $40, variable selling and administrative expenses $14, and fixed selling and administrative expenses $28. Its desired ROI per unit is $30. Compute its markup percentage using a total-cost approach

Answer 1

Mark−up percentage = 18.75%

Step-by-step explanation:

Total manufacturing cost= Direct material + Direct labor + Variable overhead + Fixed overhead

= $36 + $24 + $18 + $40

= $118

Hence, the total manufacturing cost is $118.

Total selling cost = Fixed selling cost + Variable selling cost

Total selling cost = $28 + $14

Total selling cost = $42

Hence, the total selling cost is $42

Total cost = Total Manufacturing cost + Total selling cost

Total cost = $118 + $42

Total cost = $160

Mark−up percentage = ROI / Total cost * 100

Mark−up percentage = $30 / $160 * 100

Mark−up percentage = 0.1875 * 100

Mark−up percentage = 18.75%